In a recent Armed Services Board of Contract Appeals (ASBCA) decision, Nelson, Inc., a Small Business Administration (SBA) certified HUBZone construction company based in Memphis, Tennessee, succeeded in reversing the termination for default of its $9.2 million contract with the U.S. Army Corps of Engineers (Corps). The decision highlights how important it is for contractors to maintain careful records of delays caused by factors outside of their control, not just to prove entitlement to additional time or damages, but also to protect against improper default terminations.
Nelson had a contract with Corps to build stone dikes on the Mississippi River. The project involved four sites, Loosahatchie, Robinson Crusoe, Friars Point and Cow Island, and spanned across three states, Tennessee, Mississippi and Arkansas. Nelson’s progress was significantly delayed at one of the sites, due to low water levels that precluded Nelson floating its equipment, then high water levels that prevented the contractor from working, as well as delayed guidance from the Corps regarding differing site conditions. When Nelson exceeded the 165 days allotted for the entire project, the Corps terminated the contract for default despite having not yet issued notices to proceed at two of the sites. Although extra days were supposed to be added to the schedule when river levels were too high or low for construction, the Corps ignored these days when calculating its timeline.
Nelson timely appealed the February 9, 2010, termination to the ASBCA. In a decision issued on December 15, 2015, the ASBCA held that because Nelson was contracted to complete four separate projects, the Corps should not have calculated the timeline for all four projects collectively. Rather, the Board found that the four sites were divisible parts of the contract for purposes of applying the default clause. When a contract is divisible, the contractor is delinquent only as to a separable part of the contract work, and it is improper for the contracting officer to terminate the entire contract for default.
The ASBCA further concluded that the Corps had wrongfully terminated Nelson’s contract, and had failed to allocate the appropriate extensions for river conditions beyond the company’s control. Indeed, the Corps had never even issued notices to proceed for work at two of the four sites, therefore there was no completion date and there could be no delay. With regard to the two sites where performance had commenced, the ASBCA found that the Corps miscalculated the time for completion and failed to grant time extensions to Nelson for adverse river conditions and the Corps’ delay in developing and providing a solution to those differing site conditions.
This case highlights the necessity for construction companies to keep detailed and accurate logs of all project delays. Should the government take unreasonable positions regarding delays, such records will be vital in obtaining additional time to which the company is entitled and could help to overturn an improper termination for default.