Rarely Used "Constructive Termination for Convenience" Argument Disposes of Contractor Claim

In a recent Court of Federal Claims decision, JKB Solutions and Services, LLC v. U.S., Nr. 19-1290C (October 16, 2020), the court held on summary judgment that the government constructively terminated an IDIQ contract for its convenience, leaving the contractor without a contract breach remedy for the government's failure to fill the expected orders under an IDIQ contract.

Under this three-year IDIQ contract, the contractor agreed to provide instruction services for courses at an Army facility in New Jersey. After the Army ordered and paid for only 30 out of the total potential 42 courses, the contractor claimed it was entitled to recover for the 12 additional courses. The court held in the government's favor.

What is interesting about this case is not the outcome, since the government is generally not required to order the maximum amount of services called for under an IDIQ contract. Instead, it is the uncommon "constructive termination for convenience" theory the court used to reach the decision.

Although the Army never notified or indicated to the contractor it was terminating the contract, the court analyzed the elements of termination for convenience and concluded the Army met them. Even worse for the contractor, because it had not introduced any termination for convenience damages, the court determined quantum was not in dispute and granted the government's motion.

Lesson learned: Contractors need to consider and apparently "foresee" both traditional and untraditional ways the government can take advantage of the termination of convenience clause.