Opinion ID: 779643
Heading Depth: 2
Heading Rank: 1

Heading: The Default Termination.

Text: 10 The government bears the burden of proof in establishing the validity of a default termination. See McDonnell Douglas Corp. v. United States, 182 F.3d 1319, 1329 (Fed.Cir.1999). We conclude that the Board's finding that HUD properly terminated the REAM contract within the parameters set forth in the default provision of the contract is correct and supported by substantial evidence. 11 The REAM contract incorporated by reference the FAR default termination clause titled Default (Fixed-Price Supply and Service) (APR 1984). 48 C.F.R. § 52.249-8 (1984). That clause provides in pertinent part as follows: (a)(1) The Government may, ... by written notice of default to the Contractor, terminate this contract in whole or in part if the Contractor fails to — 12 (i) Deliver the supplies or to perform the services within the time specified in this contract or any extension; 13 (ii) Make progress, so as to endanger performance of this contract (but see subparagraph (a)(2) below); or 14 (iii) Perform any of the other provisions of this contract (but see subparagraph (a)(2) below). 15 (2) The Government's right to terminate this contract under subdivisions (1)(ii) and (1)(iii) above, may be exercised if the Contractor does not cure such failure within 10 days (or more if authorized in writing by the Contracting Officer) after receipt of the notice from the Contracting Officer specifying the failure. 16 48 C.F.R. § 52.249-8. This provision allowed HUD to terminate the REAM contract for default after notice and a period of ten days for opportunity to cure if JMG failed to perform any provision of the contract. 17 The REAM contract contained several provisions relevant to lawn maintenance and payment for lawn maintenance. Service Item 15 of the contract required that [m]owing ... be performed approximately every fourteen (14) days but not more than twice in a one month period from April through September and that mowing be performed from October through March on an as-needed basis. Contract No. H04C94079306000, Exhibit 6A (Aug. 8, 1994); see also Johnson I, 99-2 BCA at 150,702. JMG subcontracted the lawn maintenance services to Foster Enterprises, the HUD-approved subcontractor, and later to T & T Lawn Maintenance. Id. at 150,702. 18 To facilitate reimbursement for subcontractor expenses, the contract included Contract Modification No. 4, which specified, among other things, the reimbursable costs of lawn services and the requirements for submitting invoices for cost-reimbursable items. Id. at 150,701-02. Section B-2 of the contract, as amended by Modification No. 4, provided that cost reimbursement would be based upon original subcontractor invoices with a mark-up of 15.7% for JMG to cover profit, administrative expenses, and other costs. Id. at 150,702. The unit cost for lawn maintenance services was fixed by the contract at $50 per initial visit and $25 per subsequent visit, with a slight increase over the option years. Id. Section M, Paragraph G-4 (titled Accounting), as amended, specified in pertinent part the following form for invoices: 19 When work has been accepted as satisfactory, the contractor shall submit for payment the original of the subcontractor's invoice and Form SAMS 1106, Invoice Transmittal, to each Field Office for payment to the subcontractor.... 20 All subcontractor invoices forwarded to HUD for payment shall contain the following information: ... 21 (10) the date that work was completed (or that the items were received) 22 (11) Street address and ... case number of the property on which work was completed 23 (12) Detailed description of the work performed 24 (13) Itemized pricing for all work performed... 25 (15) The original signature of the subcontractor or his or her agent 26 (16) The initials of the subcontractor or his or her agent next to any erasures or alterations on the invoice Contract No. H04C94079306000, Modification No. 4 (Jan. 30, 1995) (emphasis added); see also, Johnson I, 99-2 BCA at 150,701-02. 27 In Johnson I, the Board held that JMG's repeated failure to submit subcontractor invoices in strict compliance with the terms of the contract is a sufficient ground on which to terminate the contract for default because of its impact on administration of the contract. Id. at 150,705. The Board concluded that JMG had failed to comply with the accounting requirements of the contract. In particular, the Board found that many of the invoices JMG submitted for lawn maintenance work contained inaccurate information relating to dates of performance, description of work done, and itemized pricing. Id. at 150,701-02. The Board also found that JMG had submitted to HUD invoices that lacked subcontractor signatures and that did not have subcontractor initials next to changes. Id. at 150,702. The Board concluded: 28 JMG's failures in this regard effectively obscured the fact that it was not paying Foster, the HUD-approved lawn maintenance subcontractor, the stated contract rate for [lawn maintenance] services. JMG's faulty invoices also obscured the fact that JMG was using another subcontractor, T & T, to perform some lawn maintenance services on the contract. Some of the JMG invoices billed HUD for work that was not compensable under the contract because lawn maintenance was not to be performed on a property as of the date of the sale closing on the property. JMG continued to list lawn maintenance services on invoices for some properties that had been closed months before. 29 Id. at 150,705. 30 The Board also concluded that JMG had been given an opportunity to cure its deficiencies in contract performance but had failed to do so. The Board found that the contracting officer had sent cure notices to JMG which highlighted the above performance problems. Specifically, the contracting officer's February 28, 1996 letter addressed JMG's lack of accounting controls and its failure to comply with the invoice submission requirements of the contract. See id. at 150,702-03. His March 28, 1996 letter stated that JMG had failed to respond to the earlier cure notice by re-submitting accurate and conforming invoices, id. at 150,703, and his April 30, 1996 letter repeated the request for conforming invoices and gave notice of a final opportunity to cure before termination for default, id. The Board determined that, at the time of the default termination, many of the problems identified in the cure notices had not been corrected. Id. at 150,705. In challenging the termination for default, JMG advances three main arguments. 31 First, JMG argues that the Board improperly relied on certain evidence that was submitted by HUD shortly before the hearing. JMG contends that the Board should have granted its motion in limine seeking to have the evidence excluded. The material at issue consisted of several HUD property inspection reports which revealed that lawn maintenance work was not being performed as claimed in submitted invoices. JMG sought to have these reports excluded from evidence because they were not disclosed by HUD in response to discovery requests for all inspection reports. Johnson II, 00-2 BCA at 153,678. As a result, JMG did not see the reports until 10 days before the Board hearing. Id. JMG argues that the Board incorrectly concluded that HUD's failure to disclose the inspection reports in its response to JMG's first discovery request did not result in prejudice. 32 Procedural matters relative to discovery and evidentiary issues fall within the sound discretion of the board and its officials. Curtin v. Office of Pers. Mgmt., 846 F.2d 1373, 1378 (Fed.Cir.1988). Accordingly, a discovery or evidentiary ruling of the Board will not be overturned unless an abuse of discretion is clear and is harmful. Id. The Board, in its reconsideration decision, ruled that the denial of JMG's motion in limine and the admission into evidence of the late-submitted inspection reports did not constitute an abuse of discretion. See Johnson II, 00-2 BCA at 153,679. In particular, the Board noted that the government had not acted in bad faith and that its actions had not resulted in undue prejudice, as JMG had been given an opportunity to request additional time to examine and inspect the additional reports but had not chosen to do so. Id. We agree that the Board's denial of JMG's motion in limine was not an abuse of discretion. 33 JMG also argues that whatever invoice problems HUD had with specific invoices for some lawn cutting activity ... could have been worked out. However, JMG was given over three months, from the time of the first cure notice to the July 8th termination, in which to cure the cited deficiencies. This period was more than adequate to satisfy the requirements of the default termination clause of the contract. 34 JMG also points to various efforts it undertook to comply with the invoice submission requirements, including placing the invoices on disks and making several attempts to explain and correct discrepancies in past invoices. While these efforts are evidence that JMG may have tried to cure its deficiencies, they do not require us to conclude that the Board's ultimate finding that JMG failed to cure the invoice errors is unsupported by substantial evidence. In sustaining the default termination, the Board relied on its finding that copies of original subcontractor invoices, which JMG included with its response to the contracting officer's third cure notice, failed to meet contract requirements because the invoices were confusing, incomplete, and contained errors. Johnson I, 99-2 BCA at 150,703. JMG does not contest the deficiencies in the invoices. The Board also relied in part on the contracting officer's notice of termination, which stated as follows: 35 Each submission raises additional problems, with changes in property addresses, dates of service, and types of cuts. These changes, on top of changes between the original submission, the April submission, and the May submission create a situation in which HUD is simply unable to discern which services, if any, were actually performed, and if performed, on which dates. 36 Id. JMG does not argue that its invoice submissions in response to cure notices met the requirements of the contract. The Board's conclusion that JMG failed to cure the deficiencies in invoice submittals cited by the contracting officer is supported by substantial evidence. 37 Finally, JMG attempts to excuse its deficiencies in contract performance by asserting that Foster Enterprises, the HUD-recommended subcontractor for lawn services, was responsible for deficient lawn maintenance work, overcharges, and invoicing errors. This argument does not help JMG. A contractor is responsible for the unexcused performance failures of its subcontractors. See Olson Plumbing & Heating Co. v. United States, 221 Ct.Cl. 197, 602 F.2d 950, 957 (1979) (The contractor alone is responsible for the deficiencies of its suppliers and its subcontractors absent a showing of impossibility.); Mary Rogers Manley, HUDBCA No. 76-27, 78-2 BCA ¶ 13,519, at 66,248, 1978 WL 2465 (Oct. 25, 1978) (The principle is well established that the prime contractor is responsible for unexcused failures of performance by its subcontractors.); Emcee Constr. Co., Inc., DOTCAB No. 71-20, 71-2 BCA ¶ 8940, at 41,565, 1971 WL 994 (June 21, 1971) (To be excusable, the delay must be beyond the control and without the fault or negligence of both appellant and its subcontractor or supplier.). For the foregoing reasons, we decline to disturb the decision of the Board sustaining the default termination of JMG's REAM contract. 38