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"It is well-settled that a terminated contractor's recovery is limited to the contract price, less the monies already paid to the contract during performance, plus settlement expenses. In addition, it is well-settled that, if a terminated contractor would have been in a loss position had it been required to complete its contract work, the contractor is not entitled to recover profit as part of its termination settlement, as provided in the relevant Federal Acquisition Regulation (FAR) clause." Williams Building Company, CBCA No. 7147, 8110. The conundrum facing the Board was how to determine if a contract was in a loss position.
The Board noted that to determine whether a contractor was in a loss position required knowledge of the total contract price, which included any equitable adjustments to which the contractor is entitled. Until those equitable adjustments are resolved, the total contract price could not be determined, so the Board could not say that the contractor was in a loss position at the time of contract termination.
The Board also noted it was necessary to determine what the contractor's total cost of performance would have been had the contractor completed its work. In other words, the Board needed to evaluate the cost of work at the time of termination and the cost the contractor would have incurred to complete the remaining unperformed portion of its work. The estimate to complete includes the costs the contractor would have had to expend to correct defective performance had the contract not been terminated.
This case arose in the context of the government seeking a ruling as a matter of law that the contractor was in a loss position. Since there were issues regarding whether the contractor was entitled to an equitable adjustment to its contract price, and there were disputed facts concerning the cost to complete performance, the Board denied in part the government's motion for summary judgment.
Takeaways
The lesson a contractor should take from this decision is to:
- timely submit your REAs to ensure you accurately capture the total contract price, and
- have accurate records establishing your projected cost to complete at least every pay period.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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