Default Terminations, Reconsideration, and the Contractor’s Burden of Proof
The ASBCA’s decision in DSME Construction Co., Ltd., issued by Administrative Judge Timothy P. McIlmail, offers a useful reminder that default termination litigation often turns less on broad equitable arguments than on procedural discipline, contract text, and evidentiary proof. The case involved an Army facilities maintenance contract in Korea, a termination for default, a contractor request to convert the termination to one for convenience, and a claim for amounts allegedly due for work performed before termination.
The first important lesson is jurisdictional. Under the Contract Disputes Act, a contractor generally must appeal a contracting officer’s final decision terminating a contract for default within 90 days to the appropriate board of contract appeals. That deadline is strict. However, the Board concluded that it had jurisdiction because the contracting officer’s later decision did more than merely acknowledge the contractor’s disagreement. By considering DSME’s request to convert the default termination into a convenience termination and by addressing associated monetary relief, the contracting officer effectively reconsidered the earlier termination decision. As a result, the appeal period ran from the later decision, and DSME’s appeal was timely.
That jurisdictional ruling is significant for both sides of the procurement relationship. For contractors, it shows why post-termination submissions should be framed carefully. A well-developed conversion request or certified claim may create a new decision that can be appealed, depending on how the contracting officer responds. For agencies, it is a warning that post-default correspondence can have procedural consequences. A contracting officer who substantively reexamines the default may restart the appeal clock, even if the ultimate answer remains unchanged.
The second lesson concerns the merits of default. DSME’s contract required performance of specific maintenance obligations, including timely submission of an equipment inventory and recurring sludge removal from cooling towers. The Board found that DSME failed to meet both requirements. Once the Government established nonperformance, the burden shifted to the contractor to prove that the failure was excusable. This is often the decisive point in default litigation. It is not enough for a contractor to argue that the Government made performance harder, provided incomplete information, failed to cooperate adequately, or contributed to operational difficulty. The contractor must connect those facts to a contractual duty, prove causation, and show that performance failure resulted from circumstances beyond its reasonable control and without its fault or negligence.
DSME’s arguments did not carry that burden. The Board was not persuaded that the Army had a contractual obligation to provide the inventory support or equipment manuals DSME claimed it needed. Nor did DSME supply sufficient evidence showing that alleged access issues or equipment conditions actually prevented timely performance. The decision therefore reinforces a practical reality: default defenses are evidence-driven. Contractors must preserve contemporaneous records, document impediments, provide notices, quantify impacts, and demonstrate why compliant performance was not reasonably possible.
The third lesson is that default does not necessarily eliminate payment rights for accepted or undisputed work. Although the Board upheld the termination, it awarded DSME an amount the Government admitted was owed for certain pre-termination performance, with statutory interest. That portion of the decision is important because it separates liability for default from entitlement to payment for work the Government recognizes as compensable.
For contractors, the case is a disciplined reminder that deadlines, claims strategy, performance documentation, and proof of excuse matter. For agencies, it illustrates the importance of precise final decisions and careful reconsideration language. Default termination remains one of the Government’s most powerful remedies, but its consequences are shaped by procedure as much as by performance.
Disclaimer:
This post is for general informational purposes only and does not constitute legal, procurement, claims, contract administration, or litigation advice. Default termination rights, appeal deadlines, excusable delay defenses, and payment claims are highly fact-specific. Contractors and agencies should consult qualified counsel before relying on any ASBCA decision or pursuing a claim, appeal, or termination strategy.