Termination of Requirements Contract

In answering your questions, are we to assume that the offeror's representation was made in good faith?

In answering your questions, are we to assume that the offeror's representation was made in good faith?

That is a tricky question. While I personally believe the awardee knew exactly what they were doing there is no firm proof of this.

Basically the company has 10+ mini companies that are formed to get 8(a) certification and then once contract end the companies close. My understanding is that once the mini-company files a final tax return with the IRS the earnings of that mini-company no longer apply when determining size. In this instance the owner had too many mini-companies open at the same time and did not file a final tax return to close a larger one until after the challenge.

My belief is that someone with the knowledge to do all that successfully, knows well and good and well what they are doing. But.....then again no proof of "bad faith". So, I guess you have to assume good faith?

That is a tricky question. While I personally believe the awardee knew exactly what they were doing there is no firm proof of this.

Basically the company has 10+ mini companies that are formed to get 8(a) certification and then once contract end the companies close. My understanding is that once the mini-company files a final tax return with the IRS the earnings of that mini-company no longer apply when determining size. In this instance the owner had too many mini-companies open at the same time and did not file a final tax return to close a larger one until after the challenge.

My belief is that someone with the knowledge to do all that successfully, knows well and good and well what they are doing. But.....then again no proof of "bad faith". So, I guess you have to assume good faith?

Then I will qualify my answer. If the offeror made the representation in bad faith, then the contract would be void. If the offeror made the representation in good faith, then I would terminate for convenience and negotiate a reasonable settlement.

Then I will qualify my answer. If the offeror made the representation in bad faith, then the contract would be void. If the offeror made the representation in good faith, then I would terminate for convenience and negotiate a reasonable settlement.

Don,

What are your thoughts on providing for a settlement in excess of the total of all delivery orders combined? If the one and only task order was 100% utilized and 100% paid and there is no remaining obligated balance, what would you limit your obligation to?

I would limit my obligation to what it says in the contract. See FAR 52.212-4(l):

(l) Termination for the Government?s convenience. The Government reserves the right to terminate this contract, or any part hereof, for its sole convenience. In the event of such termination, the Contractor shall immediately stop all work hereunder and shall immediately cause any and all of its suppliers and subcontractors to cease work. Subject to the terms of this contract, the Contractor shall be paid a percentage of the contract price reflecting the percentage of the work performed prior to the notice of termination, plus reasonable charges the Contractor can demonstrate to the satisfaction of the Government using its standard record keeping system, have resulted from the termination. The Contractor shall not be required to comply with the cost accounting standards or contract cost principles for this purpose. This paragraph does not give the Government any right to audit the Contractor?s records. The Contractor shall not be paid for any work performed or costs incurred which reasonably could have been avoided.

The clause provides for a settlement that includes more than just prices paid for work performed. Why should this T4C settlement be different?

Just out of curiosity, you said you were doing a competitive 8(a). Even if your agency has an MOU with SBA allowing the agency to conduct the competition directly, you still generally need to have SBA verify the 8(a) eligibility before you award the contract. Did you do that? If so, was the issue of the offeror's size not reviewed by SBA when verifying 8(a) eligibility?

Now I would like to pose a couple ?what would you do? questions.

1.Since the set aside was for 8(a) and the contractor was found to be ?other than small?, is the T4C appropriate or would you have attempted a T for Cause?(no proof of any malicious intent)

2.Would you entertain settling the cited cost (over $100K) or deny it due to the only order issued is paid in its entirety?

I would terminate the contract for convenience and I would not pay them a nickel. See FAR 52.216-21, Requirements (OCT 1995), paragraph (: "Delivery or performance shall be made only as authorized by orders issued in accordance with the Ordering clause."

If the government terminates the contract when no order is underway, how could it owe the contractor anything? Owe what based on what?

.

I've never heard of that trick, forming a daughter corporation and then closing the daughter out after completion of a contract as a way to prevent the SBA from knowing about affiliates and accurately determining the parent firm's size.

If true, that sure suggests bad faith to me. Actually, I think that qualifies as fraud, which may always indicate bad faith.

.

Civ_1102 ? The Company was identified by SBA as 8(a). However, there was apparently some errors in their vetting process and they corrected them once the challenge was formed.

Brian ? I would venture to say it happens quite a bit.

Don/Vern

I went the direction of Vern and denied the proposal in its entirety. Using the language at 52.216-21(d)

?The Government is not required to purchase from the Contractor requirements in excess of any limit on total orders under this contract.?

In my office the disagreement with my stance was the excerpt Don pulled from 52.212-4(l)

?Contractor shall be paid a percentage of the contract price reflecting the percentage of the work performed prior to the notice of termination, plus reasonable charges the Contractor can demonstrate?

My argument is this. Regardless of how the company received and lost their 8(a) status they have a duty to themselves to protect the interest of their company. They knew the contract was being challenged and they only had an order for 3 months of service. I would think a prudent person would not commit to anything in excess of the total task orders. If they do that is on them.

Suppose you have a 1 year requirements contract for an estimated 1000 pies. At the onset of the contract you issue one order for 200 pies. The pie maker anticipating 1000 pies acquires the materials for all 1000. If over the rest of the year you never order any more pies, then you wouldn?t be responsible for the remain 800 pies worth of material would you?

This question is more interesting than I first thought. I found the following in Administration of Government Contracts, Fourth Edition, on p. 1120:

If a requirements contract is terminated for convenience, the contractor's recovery is not limited by the ordered amount or by a nominal minimum quantity, Albano Cleaners, Inc. v. United States, 197 Ct. Cl. 450, 455 F.2d 556 (1972).

The relevant passage Albano Cleaners, Inc., states:

Defendant also defends upon the basis of the ?Indefinite Quantities? section of the contract. Under this provision, defendant's contractual obligation to plaintiff was to ?order supplies hereunder having an aggregate value at the unit prices specified herein of not less than $10.00.? Defendant says that the amount of cleaning and repair service of foul weather gear that would be required could not be known in advance, and that, since the Supply Center actually did order more than $10 worth of services, it has satisfied its obligations under the contract.

This contention too is unacceptable. The controversy here is not based upon a failure to supply a specified amount of business during the contract term. The quantity of services was, to be sure, only estimated, to be paid for at unit prices for whatever amount of orders defendant placed (the estimated amount of the contract being $61,774.44). The controversy is, instead, about terminating a one-year's contract after less than a month. Over the contract term plaintiff did not have a right to any specific amount of business (the amount in part depending on the needs of incoming vessels), but it did have a right to receive whatever business of the type covered by the contract was generated in the specified contract areas (?Zones?) for the full one-year contract period. Defendant could not, after ordering $10 worth of services, thereupon further disregard the contract and order the identical services elsewhere. If defendant decided, in its best interests, to terminate the contract, the contract afforded a proper method of so doing, since it contained the standard ?Termination For Convenience? provisions. However, a termination under these provisions requires, in fairness to the contractor, compensating him in accordance with a specified formula. The contractor is at least entitled to recover the expenses he incurred in preparing to fulfill his contractual obligations. An attempted termination under the indefinite quantities clause after ordering the minimum services there specified and without any further responsibility would plainly conflict with the obligations imposed by the termination-for-convenience provisions. Whatever the permissible scope of such an indefinite quantities provision is ( see, e. g., The Tennessee Soap Co. v. United States, 126 F.Supp. 439, 130 Ct.Cl. 154 (1954)), such an unusual and unfair interpretation of the clause here involved as defendant proposes could hardly have been in accord with ?the rational intention of the parties? when they entered into this contract, Ozark Dam Constructors v. United States, 127 F.Supp. 187, 191, 130 Ct.Cl. 354, 360 (1955), and the court would not be justified in adopting it.

What's interesting is that the same does not hold true for IDIQ contracts. In this respect, Administration of Government Contracts states the following:

If the contract is an indefinite delivery/indefinite quantity contract and the government is not bound to place orders, the termination settlement will be limited to the ordered amount or the minimum quantity, whichever is greater. These problems were present in Okaw Indus., ASBCA 17863, 77-2 BCA P 12,793, in which the board held that the contract price was to be calculated according to the ordered services, so long as the amount ordered exceeded the contract minimum. It did not matter that the amount ordered was less than the "estimated amount," since there was adequate consideration to bind both parties.

Is there a way to avoid the contract without concluding (or having reason to believe) the contractor engaged in fraud? "An award is plainly or palpably illegal if the award was made contrary to statutory or regulatory requirements because of some action or statement by the contractor, or if the contractor was on direct notice that the procedures followed were unlawful." Maintenance Serv. & Sales Corp., 70 Comp. Gen. 664 (1991), discussed in Cibinic & Nash, Administration of Government Contracts (3d Ed. 1995), at 25. While the contractor may not have known that its rep & cert (or whatever document it provided to the SBA) was false, that fact is that it was, and but for the contractor's (likely negligent) representation, no award under 8(a) would have occurred.

Don:

Interesting case. But what does it lead you to conclude?

Now we are getting to the interesting (to me anyway) parts of this discussion. So it appears the courts treat the T4C of a requirements contract different than an IDIQ. I have seen the reference Don provided and would like to add the DOTBCA went into in more detail here:

Aviation Specialists, Inc., DOT BCA 1967, O2-1 BCA 31.788 (December 30, 1990)

Robert Witte wrote a good digest of the case in a 2003 NCMA article:

http://www.ncmahq.org/files/Articles/4733B_CM_Nov03_p44.pdf

?FAA argued that this ?requirements? contract, with no specified minimum, could have been allowed to run its course without ordering and would have incurred no further

liability. It contended that it should not be penalized for terminating the contract for convenience. The board noted that ? termination,? the procedure chosen by FAA,

altered the rights and obligations of both parties?.

And later

?Concurrently, ?FAA gained a valuable right; it no longer had to purchase its requirements from [ASI].? If a new requirement arose, the FAA could solicit another source. To avoid this ?requirements? feature without breaching the contract, FAA established in the contract the ?termination? mechanism, which is to be enforced even if the resulting payment to ASI is greater than it might have been if the contract were not terminated.?

If courts allow termination cost in excess of the total orders on a requirements contract, the government is stuck between a rock and a hard place.

Now, go back to the termination itself. Is the T4C still the most appropriate? Or, would a termination for cause fit the bill more. Look at 52.212-4(m), emphasis added in bold:

?The Government may terminate this contract, or any part hereof, for cause in the event of any default by the Contractor, or if the Contractor fails to comply with any contract terms and conditions, or fails to provide the Government, upon request, with adequate assurances of future performance.?

If the contractor is found to be ?other than small? after award on an 8(a) set aside are they complying with the terms and conditions of the contract?

Don:

Interesting case. But what does it lead you to conclude?

That, under a requirements contract, recovery is not limited by the ordered amount.

Is there a way to avoid the contract without concluding (or having reason to believe) the contractor engaged in fraud? "An award is plainly or palpably illegal if the award was made contrary to statutory or regulatory requirements because of some action or statement by the contractor, or if the contractor was on direct notice that the procedures followed were unlawful." Maintenance Serv. & Sales Corp., 70 Comp. Gen. 664 (1991), discussed in Cibinic & Nash, Administration of Government Contracts (3d Ed. 1995), at 25. While the contractor may not have known that its rep & cert (or whatever document it provided to the SBA) was false, that fact is that it was, and but for the contractor's (likely negligent) representation, no award under 8(a) would have occurred.

Jacques,

If you research some of the decisions dealing with misrepresentation of size status, there is usually some discussion as to whether the representation was made in bad faith. If it was, then the contract is void. However, if the representation was made in good faith then the contract is not void, but it should be terminated. In other words, it seems that an offeror is required to make a good faith representation of its size status, but it is not required to be right.

If the contractor is found to be ?other than small? after award on an 8(a) set aside are they complying with the terms and conditions of the contract?

What's the term or condition that they would be failing to comply with?

What's the term or condition that they would be failing to comply with?

I would say that the contract was written on the condition that the winning contractor was an 8(a) business. Since they are not, they do not meet the terms and conditions of the contract.

When this scenario was actually happening I had a brief conversation with a member of the SBA legal staff on this issue(don't recall his name). He mentioned he didnt recall anyone attempting to terminate for cause on this issue.

That said I didnt pursue it any futher but now I am curious what other think.

That, under a requirements contract, recovery is not limited by the ordered amount.

I'm not sure the case you cited stands for that as a general proposition. It strikes me that the holding in that case was very fact specific. But let me ask you this: Do you know whether the termination for convenience "provision" in that contract read the same as todays? Did the Requirements clause? A 1972 decision is old. A lot has happened since 1972. That decision has a complex and lengthy legal history, and many of the cases that followed and cited it departed from it in some way. The current clause for fixed-price contracts was changed as recently as 2004. The Requirements clause was changed in 1995. Have you done thorough legal research?

Did the Court of Claims in 1972 adhere to the same "plain language" standard of contract interpretation now applied by the COFC and the Federal Circuit?

Moreover, the decision is a little obscure. The judge describes the contract as if it were a requirements type, but refers more than once to an "indefinite quantity" provision.

I'm not saying that you are wrong, but you haven't convinced me that you are right.

If you research some of the decisions dealing with misrepresentation of size status, there is usually some discussion as to whether the representation was made in bad faith. If it was, then the contract is void.

Is bad faith the same thing as intentional misrepresentation or fraud? If it isn't, then perhaps the CO isn't stripped of authority by FAR 33.210(.

I'm familiar with the intentional misrepresentation cases (e.g., Joseph H. Morton Co. v. U.S., 757 F.2d 1273 (Fed. Cir. 1985); C&D Const., Inc., ASBCA 38661, 90-3 BCA ? 23256; J.E.T.S., Inc., ASBCA 28642, 87-1 BCA ? 19569, affd., 838 F.2d 1196 (Fed. Cir. 1988)). I'm not familiar with any cases finding a contract void or voidable on the basis of a negligent misrepresentation. Likewise, I haven't been able to find any cases to the effect that the CO lacked authority to award the contract to a contractor who was, in fact, ineligible. I haven't done enough research to say definitively there are no such cases, but it isn't looking promising.

This is a really interesting subject and discussion - one of the best in a long time.

However I think the contractor is an opportunist and takes advantage of the 8(a) program with their forming and closing corporations. If I were the CO I would tell the contractor "I'm not sure what you are entitled to other than getting paid for whats in the single order issued. If you claim you are due more, I need to gather additional information and determine the facts about your company, its size, and how you represented the situation. I don't have the capability and experience to do that so I'm asking the IG to conduct an investigation and provide me with their findings." I bet that's the last I hear from them.

I would say that the contract was written on the condition that the winning contractor was an 8(a) business. Since they are not, they do not meet the terms and conditions of the contract.

Be more specific. What particular term or condition?

Be more specific. What particular term or condition?

The OP said

Since the set aside was for 8(a) and the contractor was found to be ?other than small?

They misrepresented themselves. Determing size standards isn't rocket science - it's based upon annual revenues.

I'm not sure the case you cited stands for that as a general proposition. It strikes me that the holding in that case was very fact specific. But let me ask you this: Do you know whether the termination for convenience "provision" in that contract read the same as todays? Did the Requirements clause? A 1972 decision is old. A lot has happened since 1972. That decision has a complex and lengthy legal history, and many of the cases that followed and cited it departed from it in some way. The current clause for fixed-price contracts was changed as recently as 2004. The Requirements clause was changed in 1995. Have you done thorough legal research?

Did the Court of Claims in 1972 adhere to the same "plain language" standard of contract interpretation now applied by the COFC and the Federal Circuit?

Moreover, the decision is a little obscure. The judge describes the contract as if it were a requirements type, but refers more than once to an "indefinite quantity" provision.

I'm not saying that you are wrong, but you haven't convinced me that you are right.

For a more recent decision, see the case that darby cited--Aviation Specialists, Inc., DOT BCA 1967, O2-1 BCA 31.788 (December 30, 1990). In that case, the contractor was able to recover considerably more than what was ordered under the contract.

I have not compared the 1984 version of the Fixed-price termination clause with the current version. I have looked at the 1984 version of the Requirements clause and it states: "Delivery or performance shall be made only as authorized by orders issued in accordance with the Ordering clause."

Is bad faith the same thing as intentional misrepresentation or fraud? If it isn't, then perhaps the CO isn't stripped of authority by FAR 33.210(.

I don't know. You're the attorney, you tell us.

I'm familiar with the intentional misrepresentation cases (e.g., Joseph H. Morton Co. v. U.S., 757 F.2d 1273 (Fed. Cir. 1985); C&D Const., Inc., ASBCA 38661, 90-3 BCA ? 23256; J.E.T.S., Inc., ASBCA 28642, 87-1 BCA ? 19569, affd., 838 F.2d 1196 (Fed. Cir. 1988)). I'm not familiar with any cases finding a contract void or voidable on the basis of a negligent misrepresentation. Likewise, I haven't been able to find any cases to the effect that the CO lacked authority to award the contract to a contractor who was, in fact, ineligible. I haven't done enough research to say definitively there are no such cases, but it isn't looking promising.

Let us know what you find.

Don, I wasn't trying to pick a fight, I was trying to find a middle ground between termination for convenience and asserting a defense of fraud. I hoped the idea of illegality (absence of CO authority to award to other than an 8(a) participant) might answer the mail, but I haven't had any luck. Don, you used the "bad faith" language, not me; I assume you know something I don't. If I inferred a distinction you didn't intend, and that "bad faith" is the same as "intentional misrepresentation," mea culpa.

Black's Law Dictionary, 8th ed., defines "bad faith" as follows: "Dishonesty of belief or purpose."

The Government Contracts Reference Book, 3d ed., defines it as follows: "Acting with malice or intent to harm the other party to a contract."

Black's defines "fraud" as follows:

1. A knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment... 2. A misrepresentation made recklessly without belief in its truth to induce another person to act... 3. A tort arising from a knowing misrepresentation, concealment of material fact, or reckless misrepresentation made to induce another to act to his or her detriment... 4. Unconscionable dealing; esp., in contract law, the unfair use of the power arising out of the parties' relative positions and resulting in an unconscionable bargain.

According to Cibinic & Nash, Formation of Government Contracts, 3d ed., 74 - 76:

The most drastic consequence of a contract made in violation of a statute or a regulation with the force and effect of law is that the Government ha the right to avoid the contract. Such contracts have been variously described as "void ab initio."... Government avoidance is limited to clear-cut violations of statutes or regulations.

* * *

Following avoidance, the contractor may not recover under the contract. Further, the contractor may be denied any compensation if fraud or other criminal conduct by the contractor was involved.

I was interpreting 'bad faith' as 'lack of good faith,' as in, a breach of the implied covenant of good faith and fair dealing. I was wrong.

I suspect reasonable minds might differ on how clear-cut the violation was. Here, I would offer that you need to look to the entire context of the 8(a) program and all the reporting requirements that go along with it. The facts as I understand them is that this contractor was engaged in a scheme to create the appearance that his business continued to qualify under the 8(a) program. I don't have a lot of sympathy for him, but I obviously don't have all the facts and context. My point is, just because the 8(a) rules are complex, doesn't mean there are not "clear-cut" violations of them, and when a business decides to take the benefits of the program, and then goes out of its way to create the appearance of multiple businesses, it is reasonable to hold them to a standard that requires them to have a fair understanding of the program that they are "gaming." I'm trying to parse the mental state requirements here. A "clear-cut" violation (I would suggest) doesn't requiring showing what the contractor actually knew, but what it should have known; while a finding of fraud does require showing an intentional misrepresentation.

I'm curious what others think of whether illegality is a possible defense here, short of invoking a defense of fraud. I may be trying to slice this thing too thinly. It may be that, implicit in any finding that the contract award involved a clear-cut illegality, one would have to conclude that the contractor engaged in fraud.

Jacques,

I know you weren't trying to pick a fight and I didn't mean to come across as hostile.

As far as your illegality argument, it is legal for the CO to award a contract to the SBA under the 8(a) program. That's what happened here.

Well, in light of that thought, can the prime contract be void ab initio?

Be more specific. What particular term or condition?

Don and Darby8001,

I accidently answered the question Don intended for Darby8001. I thought you meant it for me based on my reply.

I looked at it with my blackberry and got confused with the small screen.

Vern ? Back when this was going on I couldn?t find a ruling on it one way or the other. But, in the end my opinion was no.

To continue the story?..What I did do was deny the termination settlement proposal in its entirety and informed the contractor of their right to submit a claim. The contractor did just that and submitted a certified claim to the ASBCA. Since I had never issued a final decision the board remanded the issue back to the agency to issue a final decision.

Now, I would like to pose one final question. Do you as a CO feel it proper to pay out claimed T4C cost on this contract? Forget about any fraud or misdoings. Assume only a mistake on the part of the contractor was made. The government still needs the service and if the contractor was 8(a) they would still have the contract.

Maybe I am over simplifying or to harsh but it is hard for me to swallow the government paying out for the mistakes of a contractor.

In the end I don?t think there is a definite right or wrong answer. How the members of the Wifcon board would have handled the scenario?

I issued a final decision denying the entire claim. Since then I have accepted a position at another agency and my prior agency settled the matter before the ASBCA ruled on it.

I think this one would have been a good one to go to the board as I am interested how they would view it.

As a CO, I would not want to pay anything on the termination settlement. I know that Don found the cases that he did, but I have read the cases and would still be willing to fight it out. I would not want to yield based on a 40 year old decision. But the lawyer who argues the case for you at the board has to believe in it and be willing to try a new argument.

However, almost any attorney will tell you that if you can settle for reasonable terms, then you should, rather than risk a trial.

You could have kept the contract despite the incorrect size status ? it is still a valid contract. It seems that by going the T for C route you opened yourself up to termination settlement costs. Whether they are entitled to termination costs has nothing to do with their size representation. I think if we took the incorrect size element and other emotions out of this thread, the advice from this forum on a termination settlement would have been much different. It seems to have tainted the discussion.

deleted

You could have kept the contract despite the incorrect size status ? it is still a valid contract. It seems that by going the T for C route you opened yourself up to termination settlement costs. Whether they are entitled to termination costs has nothing to do with their size representation. I think if we took the incorrect size element and other emotions out of this thread, the advice from this forum on a termination settlement would have been much different. It seems to have tainted the discussion.

Whynot

I have to disagree the statement to keep the contract size

(Greystones Consulting Group, Inc., B-402835, June 28, 2010)

and

(Alliance Detective & Security Service, Inc., B-299342, April 13, 2007)

"We view it as inconsistent with the integrity of the procurement system and the intent of the Small Business Act, 15 U.S.C. ?? 631-657a (2006), for an agency to allow a firm to continue performing a contract where the firm was determined after award to be other than small, unless there are countervailing reasons for allowing the award to remain in place. See, e.g., ALATEC, Inc., B-298730, Dec. 4, 2006, 2006 CPD ? 191 at 5-6."

Additionally I would say the size determination is relevant to the discussion as that is the sole reason for the termination. Keep in mind I have previously said "Forget about any fraud or misdoings. Assume only a mistake on the part of the contractor was made."

Did SBA or OHA direct you to cancel the contract as a result of the protest? What remedy did they specify in the decision?

FAR 19.302(k) appears to indicate that incorrect size representation does not necessarily invalidate a contract.

Perhaps, since performance by the contractor does not appear an issue ? you could have let the contract expire at the end of the base year.

I don?t see how a T4C settlement can be denied because of a size misrepresentation ? maybe that is why after your agency settled with the contractor. There is nothing in the T4C clause that you could use. You would have to T4D.

Whynot, FAR 19.302(k) is solely about rerepresentations. I don't think it says that a contract set aside for award to a small business that is originally awarded to a contractor that is other than small is valid.

FAR 6.204(a) provides, as an exception to the requirement of full and open competition, that "contracting officers may limit competition to eligible 8(a) contractors." This doesn't say that COs may limit competition to contractors who CLAIM to be eligible 8(a) contractors. While I don't think that any contract that is the subject of a successful size protest is void or voidable; I am curious why the contractor should be entitled to T4C damages, especially if it made a negligent size representation.

In the end I don?t think there is a definite right or wrong answer. How the members of the Wifcon board would have handled the scenario?

I would not have terminated the contract. SBA appeal decisions received after award do not apply to the pending acquisition. FAR 19.302(i) states:

An appeal from an SBA size determination may be filed by any concern or other interested party whose protest of the small business representation of another concern has been denied by an SBA Government Contracting Area Director, any concern or other interested party that has been adversely affected by a Government Contracting Area Director?s decision, or the SBA Associate Administrator for the SBA program involved. The appeal must be filed with the?

Office of Hearings and Appeals

Small Business Administration

Suite 5900, 409 3rd Street, SW

Washington, DC 20416

within the time limits and in strict accordance with the procedures contained in Subpart C of 13 CFR 134. It is within the discretion of the SBA Judge whether to accept an appeal from a size determination. If the Judge decides not to consider such an appeal, the Judge will issue an order denying review and specifying the reasons for the decision. The SBA will inform the contracting officer of its ruling on the appeal. The SBA decision, if received before award, will apply to the pending acquisition. SBA rulings received after award shall not apply to that acquisition.

The GAO decisions that you cited recommend termination in the absence of countervailing circumstances. If the SBA decides to consider an appeal, that is a countervailing circumstance. Consider Tiger Enterprises, Inc. B-292815.3; B-293439, January 20, 2004

We previously have found, in circumstances such as these, where a timely size protest has been filed, there is no appeal of the SBA?s size ruling, and there are no countervailing circumstances that would weigh in favor of allowing the large business concern to continue performance, that termination of the awardee?s contract is appropriate. Adams Indus. Servs., Inc., B-280186, Aug, 28, 1998, 98‑2 CPD ? 56; Diagnostic Imaging Tech. Educ. Ctr., Inc., B-257590, Oct. 21, 1994, 94-2 CPD ? 148 at 2-3. In the absence of countervailing reasons, we view it as inconsistent with the integrity of the Small Business Act, 15 U.S.C. ?? 631-657a, for an agency to permit a large business, which was ineligible under the terms of the solicitation, to continue performance. Adams Indus. Servs., Inc., supra.

From what you have told us, I don't believe that you were required to terminate the contract.

FAR 6.204(a) provides, as an exception to the requirement of full and open competition, that "contracting officers may limit competition to eligible 8(a) contractors." This doesn't say that COs may limit competition to contractors who CLAIM to be eligible 8(a) contractors. While I don't think that any contract that is the subject of a successful size protest is void or voidable; I am curious why the contractor should be entitled to T4C damages, especially if it made a negligent size representation.

I am curious, too. I didn't expect to find what I found in the court and board decisions.

Wynot ? I don?t know if you will find a situation in a size challenge where the SBA will recommend termination. Correct me if I am wrong but I believe (although I haven?t done the research) that their rulings on this issue are merely the size of the company.

Don-

While the FAR does allow for continued performance on post award size challenges the SBA regs (which the board view as controlling) do not.

See - Adams Indus. Servs., Inc., B-280186, Aug, 28, 1998

?While FAR ? 19.302(j) treats size status protests received after award of a contract

as having no applicability to that contract, SBA's regulations, which we view as

controlling in this area, provide that "[a] timely filed protest applies to the

procurement in question even though a contracting officer awarded the contract

prior to receipt of the protest." 13 C.F.R. ? 121.1004©. Moreover, in the absence

of countervailing reasons, we view it as inconsistent with the integrity of the

competitive procurement system and the intent of the Small Business Act, 15 U.S.C.

?? 631-657a (1994), for an agency to permit a large business, which was ineligible

under the terms of the RFQ, to continue to perform. Diagnostic Imaging Tech.

Educ. Ctr., Inc., supra.?

As for the Tiger case and the issue of whether or not there is an appeal. I have to disagree with your interpretation of the case. I would agree that it would not be appropriate to terminate a contract that is currently under appeal. There is a chance they could win the appeal. However, if the appeal has already happened and the appellate was unsuccessful I do not think the appeal would safe guard them from termination. Otherwise wouldn?t everyone appeal?

Also, I don?t think the case is considering the OHA?s decision to hear the appeal a countervailing reason. A countervailing reason is there is another offer that would have and could have been given the award.

I guess you all raise good points and in the end we must agree to disagree. I come here to read the good, well thought out discussions. I am glad I finally stopped lurking and got involved in one.

It was a valid contract and the initial purchase order you awarded under it was valid. You chose to terminate the contract but not the purchase order. You had two options - T4C or T4D. You chose T4C. Any contract can be T4C at any time for no reason at all. T4C allows the terminated contractor to collect costs as a result of the termination - termination settlement. My point is that there is not a third flavor of termination - (T4C and not collect costs as a result of the termination - no termination settlement).

Also, I would imagine that if were found to an invalid contract it would not have to be terminated - it simply would not exist.

Don-

While the FAR does allow for continued performance on post award size challenges the SBA regs (which the board view as controlling) do not.

See - Adams Indus. Servs., Inc., B-280186, Aug, 28, 1998

?While FAR ? 19.302(j) treats size status protests received after award of a contract

as having no applicability to that contract, SBA's regulations, which we view as

controlling in this area, provide that "[a] timely filed protest applies to the

procurement in question even though a contracting officer awarded the contract

prior to receipt of the protest." 13 C.F.R. ? 121.1004?. Moreover, in the absence

of countervailing reasons, we view it as inconsistent with the integrity of the

competitive procurement system and the intent of the Small Business Act, 15 U.S.C.

?? 631-657a (1994), for an agency to permit a large business, which was ineligible

under the terms of the RFQ, to continue to perform. Diagnostic Imaging Tech.

Educ. Ctr., Inc., supra.?

Nothing in FAR 19.302 states that size status protests received after award do not apply to the instant contract. This is what FAR 19.302(d) states about the applicability of a protest:

In order to affect a specific solicitation, a protest must be timely. SBA?s regulations on timeliness are contained in 13 CFR 121.1004. SBA?s regulations on timeliness related to protests of disadvantaged status are contained in 13 CFR 124, Subpart B.

This statement is not qualified by "unless an award has already been made."

I think that you are confusing the rule about the applicability of SBA rulings on size status appeals with the rule on the applicability of size status protests. Two different things.

As for the Tiger case and the issue of whether or not there is an appeal. I have to disagree with your interpretation of the case. I would agree that it would not be appropriate to terminate a contract that is currently under appeal. There is a chance they could win the appeal. However, if the appeal has already happened and the appellate was unsuccessful I do not think the appeal would safe guard them from termination. Otherwise wouldn?t everyone appeal?

Also, I don?t think the case is considering the OHA?s decision to hear the appeal a countervailing reason. A countervailing reason is there is another offer that would have and could have been given the award.

First, just because an offeror files an appeal doesn't mean the SBA will hear it. See FAR 19.302(i):

It is within the discretion of the SBA Judge whether to accept an appeal from a size determination. If the Judge decides not to consider such an appeal, the Judge will issue an order denying review and specifying the reasons for the decision. The SBA will inform the contracting officer of its ruling on the appeal. The SBA decision, if received before award, will apply to the pending acquisition. SBA rulings received after award shall not apply to that acquisition.

If the Judge decides not to hear the appeal, then the determination of the SBA Government Contracting Area Office is final. However, if the SBA Judge decides to hear the appeal, then the size status of the offeror is undecided. If the SBA Judge rules that an offeror is other than small and that ruling is received before award, then the offeror is other than small for the pending acquisition. If the SBA Judge rules that an offeror is other than small and that ruling is received after award, then the ruling applies to future acquisitions (i.e., the offeror is not "other than small" for the pending acquisition).

All of the GAO decisions that I have read that recommend termination because an offeror has been found to be other than small make a point of stating that the size status protest is not under appeal. I have not found any decisions that recommend termination based on an SBA ruling (on an appeal) received after award, probably because such rulings do not apply to the pending acquisition.

All of the GAO decisions that I have read that recommend termination because an offeror has been found to be other than small make a point of stating that the size status protest is not under appeal. I have not found any decisions that recommend termination based on an SBA ruling (on an appeal) received after award, probably because such rulings do not apply to the pending acquisition.

Here is a case that was appealed. The facts leading up are not exactly the same but it answer your point about appeals.

Spectrum Security Services, Inc., B-297320.2; B-297320.3, December 29, 2005

?In conclusion, we find that, in the absence of countervailing reasons, it is inconsistent with the integrity of the Small Business Act, 15 U.S.C. ? 631 et seq., to permit a large business, which was ineligible under the terms of the solicitation, to continue to perform the contract. In this regard, a formal size determination by SBA becomes effective immediately and remains in full force and effect unless and until reversed by SBA?s OHA, 13 C.F.R. ? 121.1009(g)(1), and here OHA has affirmed the determination that Ahuska is not a small business concern.?

And later

?We recommend that Ahuska?s contract be terminated and that the agency consider award to Spectrum or the other small business offeror.?

Here is a case that was appealed. The facts leading up are not exactly the same but it answer your point about appeals.

Spectrum Security Services, Inc., B-297320.2; B-297320.3, December 29, 2005

?In conclusion, we find that, in the absence of countervailing reasons, it is inconsistent with the integrity of the Small Business Act, 15 U.S.C. ? 631 et seq., to permit a large business, which was ineligible under the terms of the solicitation, to continue to perform the contract. In this regard, a formal size determination by SBA becomes effective immediately and remains in full force and effect unless and until reversed by SBA?s OHA, 13 C.F.R. ? 121.1009(g)(1), and here OHA has affirmed the determination that Ahuska is not a small business concern.?

And later

?We recommend that Ahuska?s contract be terminated and that the agency consider award to Spectrum or the other small business offeror.?

Good find. I should have read the SBA regulations, they are much clearer. The FAR says the size determination is "final" "unless appealed" and the SBA regs say the determination is "effective and in full force" "unless reversed by OHA."

You started a very thought-provoking discussion. I hope you continue to participate in the forum.