Should You Challenge Your Termination for Convenience? It May Be Difficult, but It’s Not Unprecedented

As I noted in our last article, the Trump Administration has brough seismic shifts to federal Agencies through the Department of Government Efficiency (DOGE). Through swift action to cut discretionary federal spending, DOGE has implemented large scale reductions in the federal workforce, terminated lease agreements through the General Services Administration, and initiated terminations of grants and cooperative agreements. DOGE has revised the precise amount of estimated savings it has introduced through these combined actions, but its March 11 Wall of Receipts (which links to Contract Action Reports (CARs) in the Federal Procurement Data System (FPDS)) shows that the Trump Administration has cancelled over 5,000 federal contracts. A random sampling of shows that agencies are terminating many contracts for convenience.

Many of the terminations are tied to the Trump Administration’s 89 executive orders. These orders direct Agency heads to terminate contracts for several reasons, including (among others) the following:

• To “reduce overall Federal spending” (Order 14222);
• To eliminate “equity-related grants and contracts” (Order 14151);
• To terminate contracts with businesses who have retained the law firm Perkins Coie (Order 14230);
• To terminate contracts that “impose and undue burden on the identification, development, or use domestic energy resources” (Order 14154);
• To terminate contracts related to the teaching of “gender ideology or discriminatory equity ideology” in k-12 schools and related teaching programs (Order 14190).

There are numerous and varied fiscal and policy justifications for contract termination, and contractors affected by these actions may need to be clear-eyed about where they fall on the list to understand if it may be worth pushing back on the termination. If you do push back, you can either request an alternative to termination or challenge it under a breach theory.

Requesting an Alternative to Termination

In some circumstances, particularly where the EO permits Agency Heads to make exceptions to termination (such as Section 3(i) of Order 14222), it is worth attempting to persuade the Agency that the contract provides value, whether by demonstrating cost-cutting or through eliminating problematic portions of the contract. For example, if you think your contract was terminated due to Order 14190 regarding “gender ideology or discriminatory equity ideology,” you could request a modification to eliminate those line items as an alternative to termination. Jeremy Burkhart and Terry Elling of the law firm Holland & Knight, LLP have provided some insight into strategies a contractor may utilize when choosing this approach. This path requires demonstrating the value you provide, and you may find more success than you will through challenging the termination outright.

Challenging the Termination

What about challenging the termination for convenience? Challenging a termination directly is a steep climb, since the Government’s right to terminate for convenience is a “deeply engrained strand of public procurement policy.”[1] In other words, Agencies are given a lot of leeway when terminating for convenience, and for most contractors, challenging the won’t be worth it. The remedy for successfully challenging a termination for convenience is a breach claim under the Contract Disputes Act and the award of associated breach damages.

Although the burden may be steep, there is precedent for successfully overturning Terminations for Convenience. Terminations that are intended to target and punish a contractor, i.e., terminations done “in bad faith” have been found to be invalid. In addition, terminations that are found to an “abuse of discretion” are also subject to scrutiny. While these theories are rarely used due to the high evidentiary burden on contractors, it may be time to dust them off, particularly for some of the terminations directed at named institutions, businesses, and universities. Several recent terminations appear to be targeted, unfair, or otherwise malicious, and the breadth and punitive nature of some of the terminations may make them ripe for challenge.

In addition, challenges to several Executive Orders directing Agencies to terminate for convenience are also making their way through the courts. For example, the law firm Perkins Coie has filed a complaint challenging the EO that targets contractors who do business with the firm, under the theory—among others—that the Order exceeds the President’s authority. If a contractor can show that an Agency terminated its contract due to an unlawful executive order, it may be worth challenging the finding.

Getting the Most from your Termination Settlement Proposal

Even if you don’t challenge the validity of termination for convenience, you may submit a termination for convenience settlement proposal to recover costs for any work performed prior to the termination and for costs related to the termination settlement. Here, it is important to capture all allowable costs to maximize your settlement amount. If you are navigating a termination for convenience, schedule a consultation with GovSpring Legal to ensure you maximize your settlement and exercise all available remedies in case there is a dispute regarding settlement amount. You can also click here to tell us about your legal needs, and the managing attorney will be in contact as his earliest convenience. 

[1] G. L. Christian and Associates v. the United States, 312 F.2d 418 (Ct. Cl. 1963)