Opinion ID: 1652082
Heading Depth: 1
Heading Rank: 2

Heading: federal procurement law

Text: The concept of termination for the government's convenience developed as a method to avoid procurement contracts after the close of the Civil War. The government, under certain circumstances, would terminate contracts and settle with the contractor for partial performance. See generally Torncello v. United States, 231 Ct.Cl. 20, 681 F.2d 756, 764-766 (1982), explaining United States v. Corliss Steam-Engine Co., 91 U.S. 321, 23 L.Ed. 397 (1875), and Tim A. Thomas, Annotation, Application, to Determination of Government's Liability Under Public Contract, of Doctrine of Constructive Invocation of Clause Authorizing Termination for Convenience of GovernmentModem Cases, 104 A.L.R.Fed. 661, 1991 WL 741686 (1991). Since the enactment of the first Federal Procurements Regulation in 1964, termination for convenience has evolved into a principle for Government contracts of far-ranging varieties, both civilian and military. Krygoski Const. Co., Inc. v. United States, 94 F.3d 1537, 1541 (Fed.Cir.1996), cert. denied, 520 U.S. 1210, 117 S.Ct. 1691, 137 L.Ed.2d 819 (1997); see also 48 C.F.R. § 49.502 (1995). As explained by the 11th Circuit Court of Appeals, termination for convenience permits the Government to terminate a contract, even in the absence of fault or breach by the other party, without incurring the usual financial consequences of breach. Stock Equipment Co. v. Tennessee Valley Authority, 906 F.2d 583, 586 note 3 (11th Cir.1990), citing Maxima Corp. v. United States, 847 F.2d 1549, 1552 (Fed.Cir.1988). While the law is clear that a contracting officer cannot terminate for convenience in bad faith simply to acquire a better bargain elsewhere, the federal courts have been inconsistent in enunciating a standard for exercising termination for convenience clauses. In Colonial Metals Co. v. United States, 204 Ct.Cl. 320, 494 F.2d 1355 (1974), overruled in Torncello, supra , the Court of Claims upheld the Navy's termination for convenience of a contract for copper in order to obtain a better price, even though the Navy was aware of the better price at the time of the initial contract award. The court held to the accommodating standard that the government may terminate a contract for its convenience in good faith, in the absence of some proof of malice or conspiracy. Colonial Metals, supra, at 1361. The Colonial Metals decision has been called the high-water mark of courts' permissiveness in allowing the government to terminate for convenience. Linan-Faye Const. Co., Inc. v. Housing Auth. of the City of Camden, 49 F.3d 915, 924 (3d Cir.1995). Subsequently, the Court of Claims, with six members sitting en banc, in Torncello v. United States, supra , overruled Colonial Metals . The plurality in Torncello enunciated the substantial change in circumstances standard, broadly restricting the availability of the [termination for convenience] clause to situations where the circumstances of the bargain or the expectations of the parties have changed sufficiently that the clause serves only to allocate risk. 681 F.2d at 771. The Torncello court and later courts viewed the termination for convenience clause as allocating some of the risk of changed circumstances to the contractor. Id. at 763; Erwin v. United States, 19 Cl.Ct. 47, 53 (1989); Maxima, supra, 847 F.2d at 1552. The Torncello court defined the substantial change of circumstances standard as a change in the circumstances from the reasonable expectations of the parties at the time of the agreement. Torncello, supra, 681 F.2d at 766. In 1984, Congress enacted the Competition in Contracting Act (CICA), (codified as amended in §§ 10, 31 and 41 U.S.C.), which articulated significant factors bearing on a contracting officer's decision to terminate a contract for the government's convenience. CICA requires executive agencies, when procuring property or services, to obtain full and open competition through use of competitive procedures. 41 U.S.C. § 253(a)(1)(A). In Krygoski Const. Co. v. United States, supra, at 1543, the United States Court of Appeals for the Federal Circuit explained: This competitive fairness requirement, with its bid protest remedies, restrains a contracting officer's contract administration. If, for instance, a contracting officer discovers that the bid specifications inadequately describe the contract work, regulations promulgated under CICA may compel a new bid. See 10 U.S.C. § 2305; 48 C.F.R. § 1.602-2. Thus, to accommodate CICA's fairness requirements, the contracting officer may need to terminate a contract for the Government's convenience to further full and open competition. 48 C.F.R. § 1.602-2(b); see 41 U.S.C. § 414 (1994). Thus, to further its full competition objective, CICA permits a lenient convenience termination standard. In the wake of CICA, the Krygoski court limited the applicability of Torncello to situations where the Government enters into a contract with no intention of fulfilling its promises. Krygoski, 94 F.3d at 1543-44 ( citing Salsbury Industries. v. United States, 905 F.2d 1518 (Fed.Cir.1990), cert. denied, 498 U.S. 1024, 111 S.Ct. 671, 112 L.Ed.2d 664 (1991)). Instead, the court enunciated a cardinal change in circumstances standard requiring an alteration in the work so drastic that it effectively requires the contractor to perform duties materially different from those originally bargained for. Krygoski, supra . Nonetheless, three years later in T & M Distributors, Inc. v. United States, 185 F.3d 1279, 1284 (Fed.Cir.1999), a subsequent panel of the same federal Court of Appeals held, [A] cardinal change is not a prerequisite for a valid termination for convenience. See also Custom Printing Co. v. United States, 51 Fed. Cl. 729 (2002).