Termination for Default

a. A termination for default may be issued if the contractor (27 DCMR § 3700.2): i. Fails to deliver the required supplies, or to perform the required services, in

conformance with the contract’s requirements, within the time specified in the contract (note that the legal doctrine of substantial compliance precludes default termination for minor non-conformances, but allows the buyer to accept at a reduced price or allow additional time to correct the minor problems);

ii. Fails to comply with the terms and conditions of the contract and does not cure such failure within ten days (or such longer period as the Director of the Office of Contracts may authorize in writing);

iii. Fails to make sufficient progress on the contract, which endangers performance of the contract in accordance with its terms, and does not cure such failure within ten days (or such longer period as the Director of the Office of Contracts may authorize in writing). iv. Unequivocally refuses to continue performing the contract. An unequivocal refusal

may be established when the Contractor conditions continued performance on a condition that it is not authorized to make, such as demanding additional money for performing a contract that has not been changed or modified.

b. Procedures:

i. When a termination for default is being considered, the contracting officer shall decide which type of termination action to take after consultation with contracting and

technical personnel and legal counsel. 27 DCMR § 3711.1. Factors to be considered prior to taking any default action include:

(B) The specific reasons for the failure;

(C) The period of time needed to obtain the goods or services from other sources compared to the time that the delinquent contractor could accomplish delivery or performance.

(D) The urgency of the need for the supplies or services and the period of time required to obtain them from other sources, as compared with the time for delivery that could be obtained from the delinquent contractor;

(E) The degree to which the contractor is essential to the District procurement pro- gram and the effect of a termination for default upon the contractor's capability as a supplier under other contracts;

(F) The effect of a termination for default on the ability of the contractor to liquidate guaranteed loans, progress payments, or advance payments;

(G) Whether the contractor has a defense of excusable delay (27 DCMR § 3714); and

(H) Any other pertinent facts and circumstances.

ii. Cure Notice. If a contractor fails to perform, the Contract Specialist should send a “Cure Notice” to the Contractor via email, certified mail or in person, with returned receipt requested.

(A) The Cure Notice shall specify the problem, require the Contractor to explain how it will remedy the problem and advise the Contractor that it may be liable for any excess costs of re-procurement, should the OCFO decide to acquire the goods or services from another contractor. Generally, the Contractor must respond within ten (10) days, unless the Contract Specialist determines that additional time is needed.

(B) The Cure Notice must be approved by the Contracting Officer prior to being sent. If the Contract Specialist and the contractor cannot reach a satisfactory solution, the Contract Specialist may recommend to the Director of the Office of Contracts that the contract be terminated.

(C) The notice shall reserve the District's rights under the default clause of the contract. 27 DCMR § 3711.2

(D) If the contractor is a certified minority business, the Contracting Officer must forward a copy of any cure notice or show cause notice to the Minority Business Opportunity Commission. 27 DCMR § 3711.5.

iii. Show Cause Notice. 27 DCMR § 3712. If the Director of the Office of Contracts decides to terminate the contract for default, the Director will issue a “Show Cause “ letter to the Contractor itemizing the conditions of default and asking the Contractor to

explain whether there is any reason why the contract should not be terminated for default. The Show Cause letter may be sent via certified mail or delivered in person, notice of receipt requested.

iv. Notice of Termination for Default. 27 DCMR §3713. If the Director of the Office of Contracts decides to terminate the contract for default, the Director must issue a Notice of Termination for Default to the Contractor.

(A) The Notice of Termination for Default shall include the following: (1) The acts or omissions constituting the default;

(2) A statement that the contractor's right to proceed further under the contract, or a specified portion of the contract, is terminated;

(3) A statement that the supplies or services terminated may be purchased against the contractor's account, and that the contractor will be held liable for any excess costs;

(4) If the contracting officer has determined that the failure to perform is not excusable, a statement that the notice of termination constitutes a

decision to that effect, and that the contractor has the right to appeal the decision under the disputes clause in the contract;

(5) That the District reserves all rights and remedies provided by law or under the contract, in addition to charging excess costs; and

(6) That the notice constitutes a decision that the contractor is in default as specified and that the contractor has the right to appeal the termination under the disputes clause in the contract.

v. OCFO Remedies.

(A) If the Contract is terminated for default, the OFCO may take re-procurement action by awarding to the next vendor in line for award or by re-soliciting bids or. (B) If the repurchase results in increased costs to the OCFO, the OCFO may recover

from the defaulted contractor any reasonable costs in excess of the contract price incurred to re-procure the terminated products or services from another source, and any damages (losses) suffered as the result of any delays in receiving the goods or services. The OCFO will have the burden of proving the dollar value of its excess re-procurement cost and other losses caused by the default. 27 DCMR § 3716.

(C) The OCFO will invoice the defaulted contractor for the excess costs. Until the excess costs repayment has been received, the contractor may be removed from OCFO’s Vendors List. If repayment has not been made by the end of the

specified period of time, collection action may be taken via set-off procedures. In addition, concurrent action to debar the defaulted contractor can be initiated. The

Contractor has the right to challenge termination for default, but must submit any default claim or protest within 90 days after receipt of the notice of default. vi. Conversion to Termination for Convenience.

(A) Conversion to a termination for convenience is appropriate if the Contracting Officer determines that a termination for default is not justified because the Contractor’s failure to perform was due to circumstances beyond the control and without the fault or negligence of the Contractor or of a subcontractor (if the contractor cannot obtain the required supplies or services from another source in time to meet the required delivery schedule).

(B) If the termination for default is converted to a termination for convenience: (1) The Contractors shall not be liable for any excess costs of re-procurement; (2) Shall be entitled to payment for acceptable work performed up until the

effective date of termination, plus reasonable termination costs; and (3) Shall not be suspended or debarred based on the termination.

I. CONTRACT CLAIMS AND DISPUTES.

1. Overview.

a. The Contracting Officer must attempt to resolve all disputes arising under or relating to contracts by mutual agreement after informal discussions between the contractor and the contracting officer.

b. Any dispute arising under or relating to a contract which is not resolved by informal discussions between the contracting officer and the contractor pursuant to §3800.1 may be treated as a claim and pursued under the appropriate provisions of the Act and this chapter. 27 DCMR § 3801.3, amended 51 DCR § 1432 (2/6/04)).

2. Claims Filed By the Contractors Against the OCFO.

a. When a contractor files a claim against the OCFO, the Contracting Officer must review the claim to ensure that it contains the following information:

i. A description of the claim and the amount in dispute; ii. Any data or other information in support of the claim;

iii. A brief description of the contractor's efforts to resolve the dispute prior to filing the claim; and

iv. The contractor's request for relief or other action by the contracting officer. 27 DCMR § 3803.3, amended 51 DCR § 1432 (2/6/04).

b. Procedure.

i. If the claim is not resolved by mutual agreement, the Contracting Officer must issue a written decision on the claim within sixty (60) calendar days after the receipt of the claim. 27 DCMR § 3803.5, amended 51 DCR § 1432 (2/6/04). The Contracting Officer's written decision shall do the following:

(A) Grant or deny the contractor's claim, in whole or in part; (B) Give the reasons for the contracting officer's decision;

(C) Inform the contractor of the right to seek further redress by requesting an informal hearing and decision by the Director;

(D) Include the information specified in §3806.7(a), (b), (c), and (e); and

(E) Specifically indicate that the written document is the contracting officer's final decision.

ii. Any failure by the Contracting Officer to issue a decision on a claim within the required time period will be deemed to be a denial of the claim, and will authorize the

commencement of an appeal to the CAB, as authorized by DC Code §2-309.04. 3. OCFO Claims Against a Contractor.

a. If the Contracting Officer cannot resolve a dispute arising under or relating to a contract with a contractor, and the dispute involves a claim by the OCFO against the contractor, the Contracting Officer must file a written claim with the Director of the Office of Contracts. The Contracting Officer must provide the complete contract file to the Director within ten (10) calendar days after filing the claim. 27 DCMR § 3802.5, amended 51 DCR § 1432 (2/6/04).

b. A claim filed with the Director by a Contracting Officer shall be in writing and shall include the following:

i. A description of the claim and the amount in dispute;

ii. A copy of the contract and pertinent plans, specifications, modifications, sup- plemental agreements, addenda, change orders, other exhibits, correspondence between the District and the contractor, and any other data material to the claim; iii. A brief description of the status of performance of the contract and the contracting

officer's efforts to resolve the dispute prior to filing the claim; and

iv. The contracting officer's recommendation for action by the Director. 27 DCMR § 3802.3, amended 51 DCR § 1432 (2/6/04).

certified mail, return receipt requested, to the contractor a copy of the claim filed with the Director. 27 DCMR § 3802.4, amended 51 DCR § 1432 (2/6/04).