{"id":904018,"date":"2025-02-26T15:32:44","date_gmt":"2025-02-26T22:32:44","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=904018"},"modified":"2025-02-26T15:32:59","modified_gmt":"2025-02-26T22:32:59","slug":"termination-for-convenience-if-contract-wrongfully-terminated","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/termination-for-convenience-if-contract-wrongfully-terminated\/","title":{"rendered":"What to Do if Your Federal Contract was Wrongfully Terminated by the Government"},"content":{"rendered":"\n<p>Aron B. Beezley and Nathaniel J. Greeson | <a href=\"https:\/\/www.buildsmartbradley.com\/2025\/02\/what-to-do-if-your-federal-contract-was-wrongfully-terminated-by-the-government\/?utm_source=Bradley+Arant+Boult+Cummings+LLP+-+BuildSmart&amp;utm_campaign=ad8e7aedef-RSS_EMAIL_CAMPAIGN&amp;utm_medium=email&amp;utm_term=0_b504caf31b-ad8e7aedef-78863422\" target=\"_blank\" rel=\"noreferrer noopener nofollow\">BuildSmart<\/a><\/p>\n\n\n\n<p>Government contracts often include a <a href=\"https:\/\/www.myconstructionexpert.com\/blog\/termination-for-convenience-clauses\/\">termination for convenience clause<\/a>, generally allowing federal agencies to cancel agreements when it serves the government\u2019s interest. While this power is fairly broad, it is not absolute \u2014 and when misused, contractors may have legal recourse. Several court cases highlight situations where termination for convenience was found to be an abuse of discretion or bad faith.<\/p>\n\n\n\n<p>For government contractors, understanding these legal precedents can help identify improper terminations and explore possible remedies.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>When Termination for Convenience Becomes Abuse of Discretion<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Government Cannot Use Termination to Correct Procurement Mistakes<\/strong><\/li>\n<\/ul>\n\n\n\n<p><strong>Case:<\/strong>&nbsp;<em>Krygoski Constr. Co. v. United States<\/em>, 94 F.3d 1537 (Fed. Cir. 1996)<\/p>\n\n\n\n<p><strong>Issue:<\/strong>&nbsp;The government mistakenly awarded a contract under a small business set-aside and later terminated it for convenience to fix the error.<\/p>\n\n\n\n<p><strong>Ruling:<\/strong>&nbsp;The court held that termination for convenience cannot be used to correct government procurement mistakes if it results in bad faith or an abuse of discretion.<\/p>\n\n\n\n<p><strong>Takeaway:<\/strong>&nbsp;The government cannot cancel contracts simply to undo its own errors in the bidding process.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Termination Cannot Be Used to Escape a Bad Bargain\\<\/strong><\/li>\n<\/ul>\n\n\n\n<p><strong>Case:&nbsp;<\/strong><em>Torncello v. United States<\/em>, 681 F.2d 756 (Ct. Cl. 1982)<\/p>\n\n\n\n<p><strong>Issue:<\/strong>&nbsp;The government terminated a contract for convenience after finding a cheaper option elsewhere.<\/p>\n\n\n\n<p><strong>Ruling:<\/strong>&nbsp;The court found that the government cannot use termination for convenience to walk away from an unfavorable deal.<\/p>\n\n\n\n<p><strong>Takeaway:<\/strong>&nbsp;Agencies cannot cancel contracts just to get a better price.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Using Termination to Favor Another Contractor May Be Unlawful<\/strong><\/li>\n<\/ul>\n\n\n\n<p><strong>Case:<\/strong>&nbsp;<em>TigerSwan, Inc. v. United States<\/em>, 110 Fed. Cl. 336 (2013)<\/p>\n\n\n\n<p><strong>Issue:<\/strong>&nbsp;The plaintiff argued that the contract was terminated as a pretext to award it to another contractor.<\/p>\n\n\n\n<p><strong>Ruling:<\/strong>&nbsp;The court held that if termination is used to intentionally circumvent contractor rights or favor a competitor, it may constitute an abuse of discretion.<\/p>\n\n\n\n<p><strong>Takeaway:<\/strong>&nbsp;The government cannot manipulate contract terminations to steer awards toward preferred vendors.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Termination in Bad Faith Can Be Challenged<\/strong><\/li>\n<\/ul>\n\n\n\n<p><strong>Case:<\/strong>&nbsp;<em>Salsbury Indus. v. United States<\/em>, 905 F.2d 1518 (Fed. Cir. 1990)<\/p>\n\n\n\n<p><strong>Issue:<\/strong>&nbsp;The contractor alleged bad faith in the termination decision.<\/p>\n\n\n\n<p><strong>Ruling:<\/strong>&nbsp;While the government generally has broad discretion, a termination in bad faith can be deemed wrongful.<\/p>\n\n\n\n<p><strong>Takeaway:<\/strong>&nbsp;Contractors must prove bad faith, but if successful, the termination can be overturned.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Arbitrary or Capricious Terminations Can Be Contested<\/strong><\/li>\n<\/ul>\n\n\n\n<p><strong>Case:<\/strong>&nbsp;<em>Caldwell &amp; Santmyer, Inc. v. Glickman<\/em>, 55 F.3d 1578 (Fed. Cir. 1995)<\/p>\n\n\n\n<p><strong>Issue:<\/strong>&nbsp;The contractor argued that the termination was arbitrary and not in the government\u2019s best interest.<\/p>\n\n\n\n<p><strong>Ruling:<\/strong>&nbsp;The court stated that terminations for convenience must have a rational basis and cannot be arbitrary.<\/p>\n\n\n\n<p><strong>Takeaway:<\/strong>&nbsp;If a contractor can prove a lack of reasonable justification, they may challenge the termination.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Key Legal Principles from These Cases<\/strong><\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Bad Faith or Pretextual Termination<\/strong><\/li>\n<\/ul>\n\n\n\n<p>The government cannot terminate a contract for convenience to avoid obligations or favor another contractor.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Arbitrary or Capricious Terminations<\/strong><\/li>\n<\/ul>\n\n\n\n<p>If a termination lacks a rational basis or is done without reasonable justification, it may be an abuse of discretion.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>No Escape from a Bad Deal<\/strong><\/li>\n<\/ul>\n\n\n\n<p>The government cannot terminate a contract just because it finds a better option later.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>What Can Government Contractors Do?<\/strong><\/h4>\n\n\n\n<p>If a contractor believes a termination for convenience was wrongful, they may have legal remedies, including:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Claim Breach of Contract Damages<\/strong><\/li>\n<\/ul>\n\n\n\n<p>Typically, a contractor is only entitled to termination settlement costs (e.g., costs incurred before termination, reasonable profit on completed work, etc.). However, if the termination was arbitrary, capricious, or in bad faith, it may be treated as a breach of contract, allowing the contractor to seek lost profits.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Seek Contract Reinstatement<\/strong><\/li>\n<\/ul>\n\n\n\n<p>In rare cases, a court may reinstate a contract if performance is still possible.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Request an Equitable Adjustment<\/strong><\/li>\n<\/ul>\n\n\n\n<p>If part of the contract is reinstated or re-awarded, the contractor may be able to recover increased costs due to the termination and subsequent reinstatement.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Recover Attorneys\u2019 Fees and Costs<\/strong><\/li>\n<\/ul>\n\n\n\n<p>If the contractor proves wrongful termination, they might, in limited circumstances, be entitled to legal cost reimbursement under the Equal Access to Justice Act.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Does the Sovereign Acts Doctrine Apply?<\/strong><\/h4>\n\n\n\n<p>The Sovereign Acts Doctrine can shield the federal government from liability when its actions are taken in a public and general capacity (e.g., certain new legislation or wartime measures).&nbsp; However, if contract terminations are targeted at specific contracts rather than simply as a result of broad governmental actions, the doctrine may not apply.&nbsp;<\/p>\n\n\n\n<p>So far, the Trump administration\u2019s termination of federal contracts, although fairly widespread, has been targeted at specific types of contracts with specific agencies. As such, the government may have a difficult time establishing that its actions were not targeted at particular contracts.&nbsp;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Final Thoughts: Protecting Your Rights as a Government Contractor<\/strong><\/h4>\n\n\n\n<p>While the government has fairly broad discretion to terminate contracts for convenience, that power is not unlimited. If termination appears pretextual, arbitrary, or in bad faith, contractors should:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Review past legal precedents<\/li>\n\n\n\n<li>Assess with counsel whether the termination lacks a rational basis<\/li>\n\n\n\n<li>Gather evidence to support a potential challenge<\/li>\n\n\n\n<li>Pursue legal remedies to recover losses<\/li>\n<\/ul>\n\n\n\n<p>By understanding their rights and legal options, government contractors may be able to protect themselves from wrongful terminations and seek just compensation.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><strong>When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes &#8211; please call Advise &amp; Consult, Inc. at 888.684.8305, or email <a href=\"mailto:experts@adviseandconsult.net\">experts@adviseandconsult.net<\/a>.<\/strong><\/p>\n\n\n\n<p>Republished with permission. The article, \u201cWhat to Do if Your Federal Contract was Wrongfully Terminated by the Government\u201d was originally published on BuildSmart by Bradley Arant Boult Cummings LLP. Copyright 2025.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Aron B. Beezley and Nathaniel J. Greeson | BuildSmart Government contracts often include a termination for convenience clause, generally allowing federal agencies to cancel agreements when it serves the government\u2019s interest. While this power is fairly broad, it is not absolute \u2014 and when misused, contractors may have legal recourse. Several court cases highlight situations&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/termination-for-convenience-if-contract-wrongfully-terminated\/\">Continue reading <span class=\"screen-reader-text\">What to Do if Your Federal Contract was Wrongfully Terminated by the Government<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[9],"tags":[9895,224,324],"class_list":["post-904018","post","type-post","status-publish","format-standard","hentry","category-construction-contracts","tag-advise-consult","tag-construction-contract","tag-termination-for-convenience-clause","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What to Do if Your Federal Contract was Wrongfully Terminated by the Government - Advise &amp; 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