Federal contractors generally don’t need to worry too much about statute of limitations issues on federal contract claims because the Contract Disputes Act (“CDA”) includes a generous six-year window to file. However, it is vital to remember that there are exceptions to this rule, the most important of which is the one year deadline for filing any claim relating to a termination for convenience settlement proposal. Last month, in Appeal of Black Bear Construction Company, ASBCA No. 61181, 2017 WL 5951381 (Nov. 14, 2017), an Afghani construction contractor performing work for the US Army in Afghanistan got a painful reminder about that exception. The contractor submitted a claim for $462,160 in settlement costs five years after its contract was terminated for the convenience of the government. The government moved to dismiss the claim for failure to file within the one year deadline established by FAR 52.249-2 Termination for Convenience of the Government (Fixed-Price) (Apr. 2012) – Alternate 1, which states:

After termination, the Contractor shall submit a final termination settlement proposal to the Contracting Officer in the form and with the certification prescribed by the Contracting Officer. The Contractor shall submit the proposal promptly, but not later than 1 year from the effective date of termination, unless extended in writing by the Contracting Officer upon written request of the Contractor within this 1-year period. However, if the Contracting Officer determines that the facts justify it, a termination settlement proposal may be received and acted on after 1 year or any extension. If the Contractor fails to submit the proposal within the time allowed, the Contracting Officer may determine, on the basis of information available, the amount, if any, due the Contractor because of the termination and shall pay the amount determined.

While this is an alternate FAR clause, identical language appears in the standard clause, FAR 52.249-2 Termination for Convenience of the Government (Fixed-Price).

Despite the fact that the contractor filed its claim within the six year window provided by the CDA, the Board agreed with the government that the contractor’s claim was barred by the requirement in FAR 52.249-2 that a termination settlement proposal be filed within one year. The Board therefore dismissed the contractor’s claim, leaving it without any remedy for the costs it incurred prior to the government’s termination for convenience.

This is an important reminder for all of our federal contracting clients that a termination for convenience of the government is a unique situation. It allows the contractor to recover all of its costs incurred through the date of the termination, which is a significant boon to the terminated contractor. But it also imposes an obligation to act promptly to receive this boon. Failure to act within the one year deadline imposed by FAR 52.249-2 will not be treated sympathetically by the government or the Board. The takeaway lesson? Protect your rights and act promptly!