Attempts to recover money involve an uncertain legal landscape

Angela Styles

J. Adam Fenster

Angela Styles is a partner and federal contract law specialist in the Washington office of Miller & Chevalier. She formerly was administrator of the Office of Federal Procurement Policy. Her explanation of some of the intricacies of contract termination follows.

Many terminations for default are not clear-cut. For most types of contracts, the government is required, even in a default situation, to pay for the goods and services it has already received.

There is not a way to 'claw-back' per se in a lot of contracts. The contracts used to purchase some systems do not require that the end product actually function for the government's obligations to pay to be enforceable.

If, for example, the contract was a time-and-materials contract, the government was only paying for [Science Applications International Corp.'s] hours of labor and material, not an end result.

On the other side of the coin, there are contracts that require the contractor to deliver a working product'say, for example, a computer.

If it doesn't work, the contractor has to supply a new one or fix it. If the government decides to terminate such a contractor for default, the contractor is responsible for the government's cost to fix the computer or reprocure another one.

What may be complicating this situation is the determination of the government responsibility for the failure of the system to work. If the government bears some responsibility, a termination for default will be converted into a termination for convenience.

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