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Nov 30, 2017

By Tamara McNulty

As the former Senior Division Counsel to a Federal Government contractor, one of my jobs was to review every Solicitation or RFP upon which we were bidding. If we won, my job was to review the draft contract before signing. I heard repeatedly from others, “well you cannot really negotiate Federal contracts, so there is not that much to do.” This statement is incorrect, and approaching Federal contracting like that is a recipe for serious unintended consequences, one of which is highlighted in the case of the Appeal of Atlas Sahil Constr. Co., ASBCA No. 58951, 2017 WL 5633017 (Nov. 9, 2017).

In this case, the Armed Services Board of Contract Appeals sustained an appeal seeking termination settlement costs where the Army had terminated a base expansion contract for convenience, but denied the appeal to the extent the contractor’s quantum calculations were unreasonable or unsupported.

Atlas Sahil Construction Company appealed the denial of a certified claim seeking to recover costs resulting from the Army’s convenience termination of a contract to expand a forward operating base in Afghanistan. The government did not substantially contest Atlas’ entitlement to recover termination costs. The dispute arose over Atlas’ argument it was entitled to recover amounts based on the contract’s CLIN prices rather than on the cost of construction performed.

The contract incorporated the termination for convenience clause applicable to construction contracts, Federal Acquisition Regulation (FAR) 52.249-2, Alt. I. Atlas argued that the termination for convenience clause applicable to supply and service contracts, FAR 52.249-2 (which allows termination payments based on the contract price of goods rather than the cost of performance), should be read into the contract through the Christian doctrine, 375 U.S. 954, 84 S.Ct. 444, 11 L. Ed.2d 314 (1963).

The Board, however, found that the Christian doctrine did not require the insertion of a different termination clause, since the parties agreed to FAR 52.249-2, Alt. I, and the termination notice was issued under that clause.

Whether or not the Army or Atlas is correct about which termination clause is the correct one, Atlas accepted FAR 52.249-2 at the time it entered the contract. A careful review of the RFP or the Solicitation and raising the issue of inappropriate clauses for the kind of work to be performed before or even while responding could have allowed the Government to remove inappropriate clauses and replace them with an appropriate clause. Even if it was missed at the bidding/proposal phase the issue could have been raised before signing the contract with an inappropriate clause. The Atlas case highlights why careful review of government contracts before they are signed is so important.


Tamara McNulty is a Partner at the law firm of Asmar, Schor & McKenna, PLLC practicing in the areas of Government Contracts and Construction law. She can be reached at (202) 244-4264 and TMcNulty@asm-law.com.