Opinion ID: 208635
Heading Depth: 1
Heading Rank: 6

Heading: Default termination without contracting officer's Lisbon analysis

Text: The contractors and the amicus curiae also assert that we cannot uphold the default termination because the contracting officer, Admiral Morris, did not conduct the Lisbon analysis before the termination. They base this argument on the trial court's finding that Admiral Morris did not determine the entire effort required and the time left to complete that contract effort prior to termination. McDonnell Douglas XIII, 76 Fed.Cl. at 424 n. 72; see also id. at 437 n. 92 (concluding the contracting officer did not conduct a Lisbon analysis prior to termination). This argument is unpersuasive. First of all, as we have stated earlier, because the modified A-12 contract does not contain a fixed completion date, a Lisbon analysis cannot be strictly applied. Second, we previously stated that the government is not required to establish that the contracting officer conducted the analysis necessary to sustain a default under the alternative theory. Empire Energy Mgmt. Sys. v. Roche, 362 F.3d 1343, 1357 (Fed.Cir.2004); see also Christopher Vill., L.P. v. United States, 360 F.3d 1319, 1337 (Fed.Cir.2004) (This court sustains a default termination if justified by circumstances at the time of termination, regardless of whether the Government originally removed the contractor for another reason. (quoting Kelso v. Kirk Bros. Mech. Contractors, Inc., 16 F.3d 1173, 1175 (Fed. Cir.1994))). The contractors and the amicus curiae attempt to distinguish the present case from Empire Energy. The amicus curiae emphasizes that there is a critical distinction between failure to make progress as the asserted basis for default at the time of termination, and failure to make progress as an alternative basis for default, proven at trial, that supports an otherwise unsustainable termination for failure to timely deliver. We discern no such distinction. In fact, the amicus 's contention is illogicalit would have us, on the one hand, uphold a default termination for failure to make progress when the contracting officer never even contemplated, much less evaluated, such a basis; while at the same time, reject another default termination for failure to make progress even though the contracting officer explicitly asserted such a basis. More importantly, we are less concerned about the label of the contracting officer's action so long as, in fulfilling his duty, the contracting officer exercised reasoned judgment and did not act arbitrarily. After reviewing the record, we believe that the contractors are not victims of arbitrary government action. Admiral Morris testified that concerns about the A-12 Program increased [and] the risks increased in the fall of 1990. Id. at 424 n. 70. The trial court found that [a]s the end of 1990 approached, [Admiral Morris] was concerned that substantial development on the aircraft had yet to occur. He testified [t]he contractors were indicating that they were experiencing an overrun that they could not absorb. Cost was obviously a factor and their failure to fabricate components, their failure to meet schedule were clearly impacting cost. Id. at 423-24. Admiral Morris also testified that in the weeks leading to termination, the contractors indicated that they would not be able to meet the delivery schedule that was currently in the contract. And they would not be able to perform the contract without extraordinary relief or additional funding for the contract. Id. at 424 (alterations omitted). He explained: I didn't know at that particular time when in fact they would be able, if ever, to achieve performance of the contract and I was hearing `we will not' or `we could not.' Id. (alterations omitted). On December 17, 1990, Admiral Morris issued a cure notice, warning the contractors that their performance was unsatisfactory and the defect conditions were endangering performance of the contract. He explained that [t]he purpose of the cure notice was to advise the contractors they were failing to make progress. McDonnell Douglas XIII, 76 Fed.Cl. at 402. He testified that he had been extremely concerned with the communications coming in from the contractors that unless extraordinary relief were provided, unless the contract were restructured into a cost-type contract, that they could not or would not perform, and that belief existed certainly on December 17th. Admiral Morris considered the problems of cost overruns to be a real issue. McDonnell Douglas XIII, 76 Fed.Cl. at 404. Even though he made an effort to resolve the issue within the context of the contract without restructuring the contract, the contractors were insisting upon Public Law 85-804 extraordinary relief. [5] Even in their January 2, 1991, written response to the cure notice, the contractors again requested restructuring the contract to a cost reimbursement contract. On Sunday, January 6, 1991, Acting Under Secretary of Defense Donald Yockey told Admiral Morris that Secretary Cheney would not provide 85-804 relief. As a result, Admiral Morris thought that he had three choices: to terminate the contract for convenience, to terminate the contract for default, or to do nothing. He rejected the latter as `irresponsible,' thus focusing his attention on the other two choices. He eliminated the termination for convenience first, because he believed Contractors to be in material breach of the contract. McDonnell Douglas X, 182 F.3d at 1328. Record evidence shows that at the time of termination, Admiral Morris was justifiably insecure about the contract's timely completion. In addition, a court's review of a default justification does not turn on the contracting officer's subjective beliefs, but rather requires an objective inquiry. McDonnell Douglas XII, 323 F.3d at 1016. In this regard, the facts in the record are sufficient for the court, in a de novo review, to sustain the default termination. See Joseph Morton Co. v. United States, 757 F.2d 1273, 1277 (Fed.Cir. 1985) (It is settled law that a party can justify a termination if there existed at the time an adequate cause, even if then unknown.).