GRANTED:  March 6, 2023
CBCA 5964
HUGHES GROUP LLC,
Appellant,
v.
DEPARTMENT OF VETERANS AFFAIRS,
Respondent.
Robert A. Klimek, Jr. of Klimek & Casale, P.C., Upper Marlboro, MD; and Edward
G. Bentley, Washington, DC, counsel for Appellant.
Harold W. Askins, III, Office of General Counsel, Department of Veterans Affairs,
Charleston, SC, counsel for Respondent.
Before Board Judges SHERIDAN, SULLIVAN, and O’ROURKE.
O’ROURKE, Board Judge.
Hughes Group LLC (Hughes or contractor) appealed the decision of the Department
of Veterans Affairs (VA or agency) to terminate Hughes’ janitorial services contract for
cause based on Hughes’ failure to cure persistent performance deficiencies.  Instead of
terminating Hughes’ contract in the weeks following the cure notice, the agency breached
the contract by failing to pay Hughes for months, while Hughes continued to perform.  Ten
days after paying Hughes’ overdue invoices in full, the agency sought to terminate Hughes’
contract based on deficient work.  The notice, styled as a termination for cause, directed
Hughes to continue performing until the contract nearly expired.  Because we find that the
agency’s actions waived the right to terminate without first issuing a new cure notice,
rendered the purported termination for cause ineffective, and were arbitrary and capricious,


CBCA 5964 2
we grant the appeal and convert the termination to one for the convenience of the
Government. 
Findings of Fact
Solicitation and Award
In 2015, the VA solicited offers from service-disabled, veteran-owned small
businesses to furnish “all labor in order to provide total housekeeping cleaning services” at
multiple medical facilities in San Antonio, Texas.  This was a performance-based contract
that required scheduled and “as needed” cleaning in these facilities in order to “maintain a
satisfactory facility condition and present a clean, neat, and professional appearance.”  The
contract required services at nine facilities, which together comprised the VA South Texas
Healthcare System.
The statement of work (SOW) spanned twenty-three pages and contained detailed
requirements for various items, such as the minimum hours of coverage for contractor shifts,
staff qualifications, cleaning requirements, training, building security, quality control, safety,
government-furnished equipment, supplies, a cleaning schedule, and deliverables.  Section
12 of the contract, titled “Quality Control Monitoring,” required the contracting officer’s
representative (COR) to perform regular inspections of the contractor’s performance to
ensure compliance with the SOW.  The COR was also required to produce weekly and
monthly reports to document the results of those inspections.  The contract provided for a
one percent decrease in monthly billing by facility when the VA received five or more
complaints about Hughes’ performance during the weekly reporting period.  The contract
also contained Federal Acquisition Regulation (FAR) clause 52.212-4, Contract Terms and
Conditions – Commercial Items (Dec 2014), which included provisions for terminating the
contract for convenience and for cause.
Before submitting offers, interested firms, including appellant, participated in a partial
site visit that was limited in scope.  Potential offerors then submitted questions about the
total number of patient rooms, the tenant population, the number of restroom fixtures (or
total square footage of the restrooms), the areas requiring aseptic cleaning, and the level of
staffing under the current contract.  The VA did not provide definitive answers to these
questions but explained that the patient and tenant numbers were increasing to meet the
needs of veterans and that, as a performance-based contract, the agency did not dictate
staffing.  The agency directed interested firms to refer to their notes from the site visit in
preparing their offers.  In response to a question about the requirements listed in a cleaning
schedule attached to the contract, the VA replied that “the work schedule in attachment 2
should be used as a guide, as these are recommendations.”

CBCA 5964 3
The solicitation informed potential offerors that proposals would be considered “only
from firms who are, in the judgment of the contracting officer, well established in the
janitorial business, are financially responsible, and able to show evidence of resources,
experience, and qualifications necessary to render service under the contract.”1  The VA
awarded the contract to Hughes in November 2015.  The period of performance consisted
of one base year and two option years.  The base year began on December 1, 2015, and
concluded on November 30, 2016.
Contract Performance
Significant challenges were evident during the first quarter of the base year.  The VA
remarked that Hughes was simply not providing the level of service required by the contract. 
Hughes, on the other hand, perceived a gap between its interpretation of the contract’s
requirements and the agency’s expectations of Hughes in light of those same requirements. 
For example, two sources of frequent complaints were the canteen and an area of the hospital
that was under renovation.  Hughes’ contract included requirements for cleaning the canteen
area.  However, the food service contractor for the canteen was not disposing of its own food
trash, which created pest and rodent issues.  The VA had a memorandum of understanding
(MOU) with the food service contractor which clarified the roles and responsibilities of each
entity, but it was not provided to Hughes until after award.  Hughes, the VA, and the food
service contractor updated the MOU to clarify the division of responsibilities among the
entities.  While this effort largely resolved the problems caused by the lingering food waste,
Hughes expected a modification to the contract, which did not occur.  As for the area of the
hospital under renovation, Hughes was required to perform specific tasks in areas adjacent
to the construction site, such as mopping the hallway floor.  Hughes explained that soon after
it mopped the floor, the construction workers would produce more debris and make the floor
dirty again.  Hughes maintained that it was not responsible for cleaning up after the
construction contractor.
The VA identified numerous other complaints about Hughes’ performance, such as
leaving cleaning carts in front of patient access doors, failing to take cleaning supplies out
of boxes in supply rooms, failing to wear a uniform, dirty carpets and floors, unemptied trash
cans in patient rooms, and a lack of staffing in specific areas.  In many instances, Hughes
acknowledged the discrepancies and corrected them by retraining specific personnel and
terminating others.  At other times, Hughes offered explanations.  For example, with regard
1 This was a competitively awarded contract that considered technical approach,
past performance, and price in its evaluation of offers.  Although the solicitation placed great
emphasis on technical approach and past performance, it stated that “technical and past
performance, when combined, are less important than price.”  (Emphasis added.)

CBCA 5964 4
to the trash cans, Hughes explained that the containers were small and when hospital staff
discarded a disposable garment in the trash can, it filled up quickly and personnel were not
allowed to compact the trash.  As a result, many trash cans had to be emptied more often
than the contract required.  Also, there were some complaints about trash cans located in
areas that were not serviced by Hughes during weekend hours.  When presented with
complaints about a lack of staffing in a particular area, Hughes responded that cleaning staff
were authorized by the contract to move around among the facilities to perform scheduled
tasks and to respond to unscheduled cleaning requirements.
Hughes had its own complaints.  Vacuum cleaners and waxing machines were
identified in the contract as government-furnished equipment, but they were often broken
or poorly functioning, and the VA was slow to provide replacements or make the needed
repairs.  The contract also required the VA to provide hospital-grade disinfectants, cleaning
supplies, soap, sanitizer, and paper products.  Hughes complained that supplies would often
run out and fail to be replenished in a timely manner.  On one occasion, when Hughes’ CEO
visited the facilities to meet with the VA and inspect his company’s work, he observed and
photographed cleaning staff using trash cans for mop buckets because the VA failed to
supply the mop buckets.  As to the allegation that a member of Hughes’ staff was out of
uniform, Hughes stated that the individual was never identified or confirmed to be a Hughes
employee.
The record contains numerous communications between Hughes’ leadership, the
COR, the contracting officer, and members of the Environmental Management Staff (EMS),
which was responsible for infectious disease and quality control throughout these facilities. 
Hughes took direction from multiple individuals on a daily basis to respond to complaints
and resolve problems, a fact which undermined the efficient administration of the contract
and increased tension between EMS, Hughes, and contracting personnel.  Early on in the
contract, in an effort to resolve the challenges, Hughes proposed modifying the contract to
hire additional staff.  The VA rejected Hughes’ proposal.  The VA reasoned that the cost
increase associated with the modification would displace the next higher offeror in the
original competition for the contract.  Without any change to the contract’s terms or the
contractor’s performance, Hughes’ level of service remained the same throughout the base
year.  Although the contracting officer issued a cure notice to Hughes during the base year,
Hughes continued to perform, and the VA exercised the first option year, which began on
December 1, 2016.
In late February and early March of 2017, complaints about the level of cleanliness
in various facilities increased.  At that point, two different contracting officers had been
assigned to the contract, both of whom entertained working with Hughes to modify the SOW
in an attempt to resolve the challenges.  But since neither party seemed willing to absorb the
additional costs of hiring more staff, nothing changed.  Complaints were routine, the VA did

CBCA 5964 5
not take any payment deductions, and Hughes continued to provide sub-standard service. 
Several months later, a new contracting officer was assigned to the contract.  During his first
meeting with Hughes, on June 6, 2017, the contracting officer issued Hughes a cure notice. 
Hughes responded to each item in the cure notice in writing and provided a proposed
corrective action plan to address the deficiencies.  At the request of the contracting officer,
Hughes followed up with a revised corrective action plan on June 30, 2017.  Hughes never
received a response to either of its proposed corrective action plans.
In the months after the cure notice was issued, conditions remained the same.  Hughes
continued to perform, the VA continued to issue contract deficiency reports (CDRs), and no
deductions were taken under the contract.  Then, in August 2017, without any notice or
explanation, the VA stopped paying Hughes.  Invoices were submitted, but no payments
were received.  Hughes kept working while making repeated attempts to contact the
contracting officer about the lack of payment.  For months, the contracting officer did not
respond to Hughes’ entreaties for payment.  Conversations with the COR did not resolve the
problem.  Her explanations were evasive, and her efforts to address the lack of payment were
dilatory, at best.  When the deadline for the VA to exercise the option passed in late
September, Hughes reached out to the contracting officer’s supervisor about the overdue
payments and received an immediate response.  On October 23, 2017, the VA paid Hughes
in full, without any reservations or exceptions to the invoices.  The record contains no
evidence that the lack of payment was due to deductions taken under the contract.
Termination for Cause and Appeal
Ten days after the VA paid all of Hughes’ overdue invoices, the contracting officer
terminated Hughes’ contract for cause.  The termination notice, dated November 3, 2017,
informed Hughes that its task order contract was “being terminated effective November 25,
2017,” in accordance with the termination clause, FAR 52.212-4(m), which stated, in
relevant part: “The Government may terminate this contract, or any part hereof, for cause
in the event of any default by the Contractor, or if the Contractor fails to comply with any
contract terms and conditions, or fails to provide the Government, upon request, with
adequate assurances of future performance.”
According to the letter, the facilities had not been cleaned to the standards outlined
in the SOW, and more than twenty CDRs had been issued to Hughes since receiving the cure
notice.  The contracting officer remarked that Hughes’ corrective action plan had not
resulted in improved performance and advised that the VA would notify Hughes as soon as
reprocurement costs were calculated.  The termination letter contained no notice of appeal
rights and was not identified as a contracting officer’s final decision.  Hughes’ contract was
due to expire on November 30, 2017, just five days after the effective date of termination.

CBCA 5964 6
In response to the termination, Hughes submitted an eleven-page letter, dated
November 15, 2017, with fifteen attachments.  Hughes repeated its previous contentions and
complained that it was essentially being set up for failure.  Pointing to a provision in the
contract that gave Hughes two hours to correct problems, Hughes claimed that it corrected
problems but still received CDRs for them.  Hughes also pointed out the inconsistencies
between the SOW and the directives of EMS personnel and the contracting officer’s failure
to follow through with promised modifications to the contract.  By using MOUs to “clarify”
roles and responsibilities rather than modifying the contract, Hughes remonstrated that the
VA imposed additional work on Hughes without having to pay for it.  “Hughes Group is
being judged based on the customer’s requirement, not what is written in the SOW.”  Hughes
also raised the issue of nonpayment for six consecutive invoices as further evidence of the
VA’s attempts to undermine Hughes’ performance.  Finally, Hughes commented on the
timing of the termination, issued just five days before the end of the contract, and five
months after the cure notice.  While Hughes expressed a desire to remain on the contract and
not be terminated, Hughes questioned the motives of the contracting officer and worried
about the impact of this situation on any future performance.
On November 29, 2017, one day before the contract expired, the contracting officer
issued a second termination notice to Hughes Group, the subject of which was “Amendment
to Termination Notice for VA257-16-F-0912 dated September 13, 2017.”2  The amended
notice replied to Hughes’ response to the termination for cause, explaining that the contract
required continuous cleaning but also pointed to “a matrix at pp. 24-26 [of the contract]
which tells the contractor how often cleaning must be done.”  The contracting officer also
stated that twenty-seven CDRs had been issued between June 6 and August 1, 2017, and
then another eighteen CDRs had been issued between August 1 and September 13, 2017. 
The contracting officer explained that “due to the end of the fiscal year rush, [many of the
CDRs] were not reviewed by contracting or issued to the contractor,” and that is why they
were not identified in the first termination notice, but Hughes nonetheless received emails
about the deficiencies.
Finally, the contracting officer stated that he conducted sequential random inspections
of a medical center and an outpatient clinic, both of which Hughes was required to clean. 
He stated:  “The first inspection was done on September 15, 2017, and the second one was
done [on] October 18, 2017.  [I] made fingerprints in the dust on the 1st inspection that were
still there on the second.  These two inspections support the VA’s decision to terminate the
contract for default.”  Unlike the original termination notice, the amended one contained the
appeal rights notice and informed Hughes that it was a contracting officer’s final decision.
2 The record contains no termination notice dated September 13, 2017.

CBCA 5964 7
Hughes appealed the decision to the Board.  Hughes asked the Board to convert the
termination for cause to one for the convenience of the Government.  Hughes did not request
monetary damages in its appeal and made no separate claim for termination costs.  A virtual
hearing took place during which the Board received testimony about the facts and
circumstances surrounding the termination.
Discussion
The Board has jurisdiction to entertain a timely challenge of a termination for default, 
even absent a certified claim for monetary restitution.  See Malone v. United States, 849 F.2d
1441, 1444-45 (Fed. Cir. 1988).  In such cases, “the only relief available under an appeal of
a default termination is the conversion of the default termination to one for the convenience
of the Government.”  Aurora, LLC v. Department of State, CBCA 2872, 16-1 BCA ¶ 36,198,
at 176,648 (2015).  Here, Hughes timely appealed the default termination but submitted no
separate monetary claim.  Our sole task is to review the propriety of the termination.
“[A] government decision to terminate a contractor for [cause] is the assertion of a
government claim against such contractor within the meaning of the [Contract Disputes
Act].”  Johnson & Gordon Security, Inc. v. General Services Administration, 857 F.2d 1435,
1437 (Fed. Cir. 1988).  In cases where the Government seeks to terminate a contractor for
cause, the Government bears the initial burden of proving, by a preponderance of the
evidence, that the termination decision was justified.  Lisbon Contractors, Inc. v. United
States, 828 F.2d 759, 765 (Fed. Cir. 1987).  Once the Government has satisfied its burden,
and default has been established, the burden shifts to the contractor to demonstrate that the
causes of the default were excusable under the terms of the contract.  Heroes Hire, LLC v.
Department of Veterans Affairs, CBCA 7195, et al., 22-1 BCA ¶ 38,101, at 185,037 (citing
Emiabata v. United States, 792 F. App’x 931, 937 (Fed. Cir. 2019)).
“The default clause does not say that the Government ‘shall’ or ‘must’ terminate the
contract in the event of default, only that the Government ‘may’ terminate it.”  JAMCO
Constructors, Inc., VABCA 3271, 94-1 BCA ¶ 26,405, at 131,361 (quoting Fairfield
Scientific Corp. v. United States, 611 F.2d 854, 862 (Ct. Cl. 1979)).  The Board further
observed that “the exercise of discretion . . . presupposes an active and reasoned
consideration of available and sometimes contradictory information.  Various factors must
be evaluated and the totality of circumstances weighed by the Contracting Officer in arriving
at a decision which has the most serious consequences for a contractor.”  Id. (citing
Executive Elevator Service, VABCA 2152, 87-2 BCA ¶ 19,849, at 100,438).
The record before us is replete with such contradictory information.  There are
numerous CDRs evidencing frequent, noncompliant work by Hughes.  The cure notice
identified multiple instances of deficient performance between March 21 and May 18, 2017. 

CBCA 5964 8
Although Hughes responded to the cure notice and specifically addressed each discrepancy
in writing, the VA continued to identify and report noncompliant work by Hughes in June,
July, and August of 2017.  At that point, the VA was likely in a strong position to terminate
the contract for cause.  “Each individual omission of a service is technically a default, but
not necessarily a basis for a default termination . . . .  The contract may be terminated for
default only when the number of individual defaults have accumulated to the point where
it may be said that the contract has not been substantially performed.”  Handyman Building
Maintenance Co., IBCA 1335-3-80, 83-2 BCA ¶ 16,646, at 82,775 (citing Pride Unlimited,
Inc., ASBCA 17778, 75-2 BCA ¶ 11,436, at 54,500).
Instead of terminating the contract, however, the VA stopped paying Hughes, though
Hughes continued to work.  On August 1, 2017, Hughes presented the VA with an invoice
for payment of work performed during the second half of July, but the VA did not pay it. 
This same pattern was repeated every two weeks until October 23, 2017, when the VA paid
Hughes in full for all of its overdue invoices.  The VA had no legal basis to stop paying
Hughes while Hughes continued to work.  The contract only permitted a one-percent
deduction in billing when five or more complaints were received during the weekly report
period.  There is no evidence that the VA was exercising its rights under the deductions
provision of the contract when it stopped all payment.  By failing to pay Hughes without
excuse, the VA breached the contract.  We examine the impact of the VA’s material breach,
and its remedy of that breach, on the termination decision.3
In both its initial and amended termination notices, the VA pointed to numerous
CDRs as a basis for terminating Hughes’ contract for cause.  “Generally, in janitorial and
other service-type contracts, the necessary proof [to establish default] may be found in
contemporaneous detailed inspection and evaluation reports, which usually are an essential
part of the record keeping process of such contracts.”  Givens Services, DOT BCA 2907,
96-2 BCA ¶ 28,271, at 141,168 (citing Building Maintenance Specialists, Inc., DOT CAB 
71-35, 72-2 BCA ¶ 9553).  Under normal circumstances, such a performance record would
likely be a sufficient basis to terminate the contract.  5860 Chicago Ridge, LLC v. General
Services Administration, 104 Fed. Cl. 740, 763 (citing Cervetto Building Maintenance Co.
v. United States, 2 Cl. Ct. 299 (1983) (upholding termination of a janitorial services contract
when performance deficiencies became the rule rather than the exception)).  Here, however,
the agency’s puzzling actions in the months following the cure notice undermined the
termination decision.  For the reasons that follow, we find that those actions amounted to a
3 “Under general contract principles, a party sued for breach of contract may
defend on a theory that its non-performance is excused because the other contracting party
committed the first material breach.”  Hometown Financial, Inc. v. United States, 409 F.3d
1360, 1370 (Fed. Cir. 2005). 

CBCA 5964 9
waiver of the deficiencies complained of, rendering the termination invalid as well as
arbitrary and capricious.
Beginning with the issuance of the cure notice on June 6, 2017, and Hughes’ timely
response to the same, the sequence of events that followed included a cluster of performance
deficiencies, a material breach by the agency, and a long overdue payment to Hughes
without deductions or reservations.  Hughes argues, and we agree, that when the agency paid
Hughes in full on October 23, 2017, the agency waived Hughes’ performance deficiencies
to date, and any subsequent campaign to terminate the contract required the VA to issue a
new cure notice, which it did not do.
The waiver doctrine has been described as a hybrid of estoppel and election remedies. 
When an action or statement by the Government indicates a preference for the contractor’s
continued performance rather than termination of the contract, the Government’s election
opens the door to a claim of waiver.  The election alone, however, is not enough to establish
that the Government has waived any subsequent claim for default against the contractor. 
Another key element of the waiver doctrine is reliance:
An election becomes legally operative (as a waiver) if the contractor relies in
a significant way on this election.  It is this reliance element that makes waiver
a form of estoppel.  In deciding whether a waiver has occurred, the courts and
appeals boards weigh both (a) the statements and acts of the Government
indicating election, and (b) the amount of reliance of the contractor, to
determine whether the Government should be held to have lost its right to
terminate for default.
Ralph C. Nash & John Cibinic, Waiver of the Right to Terminate for Default: The Impact of
No-Waiver Language, 13 Nash & Cibinic Report ¶ 64 (Dec. 1999).
When the agency paid Hughes without reservation, it made an election for continued
performance.  Up until the time of payment, Hughes was operating off of its own resources,
continuing to perform in reliance upon the agency’s promise of payment and a reasonable
belief that the contracting officer was allowing the contract to expire.  Hughes could have
cut its losses, stopped performing, and filed a claim against the agency for breach of contract,
but Hughes did none of those things.  The agency’s election combined with Hughes’ reliance 
satisfy the elements of waiver.  As such, a new cure notice was required before the agency
could terminate the contract for cause:
When a “cure” notice is given, the Government must act with reasonable
promptness and terminate the contract upon the expiration of the ten-day
period set forth in the notice or upon expiration of any period of forbearance. 

CBCA 5964 10
If the Government does not act promptly, it has waived its right to terminate
based on the original cure notice and must issue another cure notice, giving the
contractor ten days to cure the failure specified in that “cure” notice, prior to
termination under section (a)(ii) of the “Default” article.
Acudata Systems, Inc., DOT CAB 1198, et al., 84-1 BCA ¶ 17,046, at 84,865 (1983).4
The agency argues that a second cure notice was not required in this case because the
first one remained valid.  The agency explained that the five-month time frame between the
cure notice and the termination provided Hughes with the opportunity to submit a corrective
action plan in response to the cure notice, to further revise that plan after the contracting
officer found it to be lacking, and to implement it.  While avoiding any discussion of its own
breach, the agency contends that five months was a reasonable forbearance period, and no
waiver of the termination occurred.  Even if this period of time could somehow be construed
as a forbearance period during which the agency reserved its right to terminate, we would
still find that the agency waived the termination due to the amount of time that passed.
Whether the period between default and the contracting officer’s termination notice
constituted a “reasonable time” depends “on the circumstances of each case.”  DeVito v.
United States, 413 F.2d 1147, 1154 (Ct. Cl. 1969).  Boards of contract appeals have found
the following termination periods reasonable in the context of commercial item contracts– 
a thirty-nine-day delay after response to a show cause notice during which the contractor did
not “perfor[m] any substantial work on the contract,” Progressive Tool Corp., ASBCA
42809, 94-1 BCA ¶ 26,413, at 131,392-93; a forty-nine-day delay after a failure to deliver
1,040,000 bottles of water with no subsequent preparations for delivery, American
Aquasource, Inc., ASBCA 56677, 10-2 BCA ¶ 34,557, at 170,417; a seven-day delay after
the contractor’s failure to deliver on an acquisitions contract, Terraseis Trading Ltd.,
ASBCA 58731, 15-1 BCA ¶ 36,176, at 176,521; and an eighty-four-day delay after failing
to correct deficiencies in a janitorial services contract, SCS Building Maintenance v.
General Services Administration, CBCA 5766, 22-1 BCA ¶ 37,992, at 184,493.  When a
contractor “continues performance in reliance on the lack of termination and proceeds to
incur obligations in [its] efforts to perform,” the permissible period is shorter.  Aquasource,
Inc., 10-2 BCA at 170,417.
4 The fact that Hughes’ contract contained the commercial items termination for
cause clause does not change our position.  Brent Packer v. Social Security Administration,
CBCA 5038, et al., 16-1 BCA ¶ 36,260, at 176,899 (“Although the commercial items
termination provision . . . does not expressly reference the need for the contracting officer
to issue a cure notice before terminating a contractor for failure to comply with contract
provisions, FAR 12.403 imposes that requirement.”). 

CBCA 5964 11
In this case, 119 days elapsed between the cure notice and the first termination notice. 
During that time, Hughes continued working, mostly without pay, and the agency did not
provide any feedback on Hughes’ corrective action plan.  Moreover, the agency’s
characterization of this time period as one of forbearance is disingenuous, since the agency
was in breach of contract for the majority of that time.  For these reasons, we are not
persuaded by the agency’s argument that five months was a reasonable period of time.  On
the contrary, we find that the agency’s actions, to include the substantial delay in issuing the
termination, resulted in a waiver of the termination.  To meet its burden, the agency needed
to issue a new cure notice prior to terminating the contract for cause.  Since no new cure
notice was issued, we find that the agency failed to establish that termination was justified.
Waiver can also be found in the termination notice itself.  The notice, dated
November 3, 2017, informed Hughes that it was terminated for cause effective November 25,
2017.  By the plain language of the notice, the contracting officer sought to terminate
Hughes’ contract while concurrently securing its continued performance.  The incompatible
commands of the termination notice are self-defeating.  “Where the Government elects to
permit a delinquent contractor to continue performance past a due date, it surrenders its
alternative and inconsistent right under the Default clause to terminate.”  DeVito, 413 F.2d
at 1153.  Here, the agency’s express willingness to allow Hughes to continue to perform,
despite Hughes’ poor performance history, indicates an election by the agency to waive that
same history.
Finally, we recognize that a contracting officer has broad discretion in terminating a
contract for cause.  Consolidated Industries, Inc. v. United States, 195 F.3d 1341, 1343-44
(Fed. Cir. 1999).  But that discretion is not without limits.  Where a contract gives discretion
to the Government, “exercise of that discretion must be fair and reasonable, not arbitrary and
capricious.”  Everett Plywood Corp. v. United States, 512 F.2d 1082, 1090 (Ct. Cl. 1975);
see also Quality Environment Systems, ASBCA 22178, 87-3 BCA ¶ 20,060, at 101,570
(stating that “whether or not to terminate a contract for default is not left by regulations to
the contracting officer’s unchecked or unlimited discretion”).  As we previously noted, the
exercise of discretion requires a reasoned consideration of all of the available information. 
JAMCO Constructors, Inc., 94-1 BCA at 131,361.  The conduct of a government official
will be deemed arbitrary and capricious where no reasonable basis can be found to support
the actions of that official.  Quality Environment Systems, 87-3 BCA at 101,569.  Here, there
is no evidence that the contracting officer considered the agency’s own failures in
administering the contract or the utility of imposing such a drastic sanction on the contractor
on the eve of the contract’s expiration.
This does not mean that Hughes’ performance was satisfactory or did not merit
adverse action.  That is not the case here.  During the pendency of this contract, Hughes
consistently, on the whole, failed to perform to the standards set by the contract, despite its

CBCA 5964 12
substantial experience in this field.  It appears from the record that Hughes realized early on
that it had likely underbid the contract and then failed to add the needed personnel when it
realized the staffing on which it based its bid would not provide adequate performance.  That
being said, the VA made “price” the most important factor in a procurement that
simultaneously sought the small business community’s top performers, then failed to hold
Hughes’ “feet to the fire” in a timely fashion, even after noting multiple and repeated
deficiencies and underperformance.
 
The VA exercised the option year without Hughes significantly improving
performance and continued to issue Hughes deficiency reports throughout the contract
without taking any deductions.  Then, for unexplained reasons, the VA failed to issue the
termination for cause until the last possible moments of the contract performance period,
while simultaneously directing the contractor to continue performing.  At that point, a more
reasoned approach to addressing Hughes’ poor performance may have been through the
contractor performance assessment reporting system.  In light of these facts, we find no
evidence of a reasoned consideration of the circumstances by the contracting officer at the
time of the termination.  Indeed, the amended notice, issued just one day prior to the
contract’s expiration, can only be explained as an arbitrary and capricious act.
For the foregoing reasons, we decline to uphold the agency’s termination for cause
and convert it to one for the convenience of the Government.
Decision
We GRANT the appeal.
   Kathleen J. O’Rourke    
KATHLEEN J. O’ROURKE
Board Judge
We concur:
     Patricia J. Sheridan        Marian E. Sullivan          
PATRICIA J. SHERIDAN MARIAN E. SULLIVAN
Board Judge Board Judge