Contractor Recovers Termination Costs Even Without Receiving a Notice to Proceed

In 2011, the Corps of Engineers awarded a contract to Pro-Built Construction to build a police station in Afghanistan. The Corps did not issue a notice to proceed however, and in 2012 (about seven months later), issued a TforC (Termination for Convenience) due to "negative security conditions.. Pro-Built submitted a TforC claim for about $1.1 million. In a final decision, the Contracting Officer determined that Pro-Built was entitled to a mere $49 thousand. Pro-Built appealed to the ASBCA.

While waiting for the notice to proceed, Pro-Built prepared its pre-construction submittal, a quality control plan, accident prevention plan, and security plan. It also sent staff and subcontractors to see the site, talk with the local people and talk with the village elders, and considered elements for the design including building codes and specifications.

The Corp asked DCAA (Defense Contract Audit Agency) to audit Pro-Built's $1.1 million claim. DCAA questioned the entire amount because the company incurred the costs prior to receiving a notice to proceed (FAR 31.201-2 and FAR 52.211-10). DCAA piled on more allegations; it was unreasonable for Pro-Built to have incurred any costs, other than to meet bond, insurance, or administrative requirements prior to receiving the notice to proceed, that Pro-Build did not have a formal accounting system; the Pro-Built's proposal was not an acceptable basis for settlement, and that Pro-Built had not properly calculated its G&A (General and Administrative) rate.

Ultimately the Board awarded Pro-Built $339,000 for a variety of reasons but most importantly, because they found, given the labor market and security situation in Afghanistan, it was reasonable for Pro-Built to incur standby costs prior to the notice to proceed. The Board allowed three months of stand-by costs rather than the eight months proposed by Pro-Built. The Board also noted that the Corps strung Pro-Built along with multiple correspondences stating, to the effect, that it would be issuing a notice to proceed imminently.

The entire Board decision can be read here.