Disputes and Termination
The Contracts Disputes Act (“CDA”) is included in every contract, usually in Section I of the contract. Collectively, these rules authorize a contractor to submit a claim to the government, under certain conditions, when changes occur during performance of contract work and the contractor has not been adequately compensated for the changed. Contractors often submit a Request for an Equitable Adjustment (“REA”) under the Changes clause to obtain compensation for performing work as changed. If they are not successful, the contractor converts the REA to a certified claim under the Disputes clause.
But what happens when a contract is terminated for the convenience of the government while a certified claim is pending?
The United States Joint Contracting Command – Iraq (“JCC”) awarded a firm fixed price contract to Symbion Ozdil Joint
Venture (“Symbion”) on June 27, 2006 for design, construction, and installation of a 132KV electric line south of Baghdad with a length of approximately 53 miles.
On December 19, 2007, Symbion submitted a REA for “piling work” in the amount of $10,276,587.82. Forty days later on February 1, 2008, the JCC terminated the contract for convenience for the remaining uncompleted work. Symbion submitted a termination settlement proposal for $1,098,167.42. The JCC paid $2,696,819.32 for the claim and the termination settlement proposal. Symbion appealed and the Board issued an opinion in the appeal of Symbion Ozdil Joint Venture, ASBCA No. 56713, dated January 25, 2010 (the “ASBCA” or the “BOARD”).
The issue to be decided was whether the extra piling work performed before the contract was terminated should be paid separately or if it is “merged” into the termination settlement proposal. Therefore, can Symbion recover the fixed unit prices for the actual piling work performed or must it be merged into the settlement proposal at cost plus a profit?
The Board decided that since the price for the piling work was based on a specification, then the specification provision entitles Symbion to an increase in the contract price at the specified unit prices.
The government’s argument relies on the “merger doctrine.” The ASBCA stated in that case that
As a general proposition, a fixed price contract is converted into a cost
