My question deals with terminating a contract in the event work is not successfully accomplished within the period provided by the contract and when the contract includes items that are not readily available on the open market.

In this case, we have a vegetative planting requirement. The requirement calls for a specific species of plant to be grown under stringent conditions by a licensed grower, and be ready for planting by a specific date after award. Plants are basically considered ready for planting when they are a specific size, have a minimum number of stems, and be viable and actively growing.

Here's the problem, if the contractor doesn't have the plants ready for planting or all the plants aren't in the ground by the end of the planting date, then the contract must be terminated. The objectives of my program people will not be met if all the plants aren't planted.

Therefore, what can a C.O. do to ensure that the contractor meets the critical time requirements of the contract? Also, what action can the Government take if the contractor doesn't have the plants planted by the end of the planting time?

By Anonymous on Tuesday, October 09, 2001 - 12:32 pm:

What is the contract type: Firm-fixed price?

By Anonymous on Tuesday, October 09, 2001 - 02:14 pm:

Yes, a firm-fixed price contract.

By Peggy Richter on Wednesday, October 10, 2001 - 11:19 am:

Given the current emphasis on using performance based contracting, your first line of defense is probably getting & requiring good past performance data -- what is the contractors track record on doing these kinds of jobs with these kinds of plants? A contractor with a 99% track record of success in these kinds of jobs is going to be a much better risk than one with say, a 50% success rate. You can certainly ask for regular progress reports, which might give you a clue about problems before the "planting date" but salvaging the planting in a given season if something goes wrong is going to be hard no matter what kind of contract you have.
The old method (non performance based) would be to set up the contract with specific inspection periods or checkpoints to verify where the contractor is: X number of plants planted, X number Y" high on such and such a date, X number Y+1" high by date A+whatever, and so forth. This would at least give you the chance to detect if the contractor isn't doing the job well in advance of the final planting date. It is still not going to do much to salvage things if it goes wrong, but it will keep you informed.

By joel hoffman on Wednesday, October 10, 2001 - 11:44 am:

Anon, you said: "Here's the problem, if the contractor doesn't have the plants ready for planting or all the plants aren't in the ground by the end of the planting date, then the contract must be terminated. "

My question is, what do you intend to do at the time you need the plants, they aren't all in the ground and after you terminate the contract? Cancel the requirement? Will it be too late to find someone else?

OR - would you like to be able to write something into the contract, that if the contractor fails to provide the plants in time to meet the requirement, that the Government may delete the requirement, take a credit, find another source and backcharge the Contractor for any extra costs for the other source?

I think the latter is possible, in a bilateral contract.

I would also develop intermediate performance milestones, so both parties will be able to tell whether the grower is going to provide satisfactory plants

happy sails! joel hoffman

By Anonymous on Wednesday, October 10, 2001 - 11:48 am:

It seems to me that if this project is critical good government inspection during the post award "growing" phase is your best bet. Then if things appear to be going south there may be time to remedy.As you know you do not have to wait for failure to terminate....not making progress and endangering the contract performance allows you to move.

By joel hoffman on Wednesday, October 10, 2001 - 12:30 pm:

Anon1, is this the entire scope of work or is it a part of a larger requirement? If this is the entire scope of work, I agree with Anon 11:48 PM, including adding a provision specifically stating that if things are going south, the contract may be immediately terminated for default, the Government can take immediate action to reprocure through other means. Be aware, if this is a performance bonded project, termination for default, in itself, won't necessarily allow you the freedom to move out immediately to reprocure. The bonding company has the right to take over the job and they always take some time to act. Therefore, I would write in special procedures in case termination for failure to meet schedule. happy sails! joel

By Anonymous on Wednesday, October 10, 2001 - 03:39 pm:

It's part of a fixed price contract for construction of earthen terraces. The terraces are built and then vegetated within 15 days after completion of each terrace. During the plant growing period we have added various types of checks to ensure ourselves that the plants are being grown in accordance with our specifications. We have specific requirements to be met by the contractor during pre-growing phase, growing phase, and post-growing phase.

My main worry during the growing period is if, for some reason, the contractor doesn't have the plants ready for the planting portion of the contract. There is not enough window of opportunity to begin growing additional plants.

My second concern is if the contractor doesn't meet the planting deadline. No further time can be provided. The contract stops at that point.

Reprocurement is not an issue. My technical people say they can't wait until the next growing or planting period to complete the work. If either of my concerns comes to pass, the only course of action I see I have is to terminate the contract for default, but not reprocure. I feel my options are very limited. In that case, the Government doesn't get it's requirement and the contractor doesn't have any excess costs charged to it.

I can see that one of the best defenses available to me is the wise use of past performance in awarding a contract. Other than that, I can only hope we have enough inspection and other controls to ensure we get the plants grown and placed in the ground within the time provided.

By joel hoffman on Wednesday, October 10, 2001 - 06:08 pm:

Anon,
(If the contract isn't awarded yet) I strongly suggest that you take my suggestion and write in the safety valve option to delete and take a credit for failure to perform - as measured at various points, including during the nursery phase. As an option, temporary cover could be provided by other type plantings - you could also make that a requirement, if the permanent plantings fail or somehow aren't available.

Of course, you can also issue interim unsatisfactory performance ratings under the FAR Part 36 Contractor performance rating system. Although that won't prevent failure, it will serve as an incentive and should affect chances for future work, if the plantings are a critical feature of the work. happy sails! Joel

By joel hoffman on Wednesday, October 10, 2001 - 06:18 pm:

Anon, I forgot to mention that, if the plantings are not the primary portion of the contract (perhaps they are ancillary to the primary work? and primary cost? - the terraces?), and are mainly for "looks", it may not be justifiable to TFD the entire contract for only failure to meet the planting schedule. There are many cases in which TFD for failure to fulfill minor terms of the contract were successfully challenged, resulting in conversion to TFC. You have a stronger legal position by taking a credit deletion and separately procuring the planting.

You can also write a provision into the contract which allows the Government to do this if the Contractopr can't perform critical planting on schedule. happy sails! joel

By Anonymous on Thursday, October 11, 2001 - 09:38 am:

The plants aren't for looks, but for holding the terraces together. The terraces are constructed using the soupy muck that rests under 2-3 feet of marsh water. That's the reason for requiring the plants to be planted within 15 days of completion of each terrace.

Our technical folks are working closely with state personnel to re-introduce "native" species of plants into the environment. It's a cost-shared federal project and my agency is the federal sponsor.

The temporary cover idea should work. Especially coupled with specific deletion language should something go awry during the growing phase. Thanks a bunch to all who responded, especially Joel.

By Anonymous on Tuesday, October 16, 2001 - 11:29 am:

If there's no possibility of reprocurement and a safety option to delete for non-performance is included, are there any damages the Government can collect due to the T4D?

By Dave Barnett on Tuesday, October 16, 2001 - 01:15 pm:

I've never used them, and have been warned away from using them, but could liquidated damages provide an answer?

By Newtothis on Tuesday, October 16, 2001 - 02:52 pm:

Joel, I do not understand what is meant by write in the safety valve option to delete and take a credit for failure to perform. Please clarify what is meant by take a credit for failure to perform.

By Vern Edwards on Tuesday, October 16, 2001 - 03:41 pm:

Anonymous:

You asked two questions: First, "What can a CO do to ensure that the contractor meets the critical time requirements of the contract?" Second, "What action can the Government take if the contractor doesn't have the plants planted by the end of the planting time?"

I'll answer your second question first, because it's the easiest. Given the conditions that you described on Oct 10 at 3:39pm, the only thing you can do is terminate the contract for default. What else is there to do? You said that no further time could be provided and that your tech people told you that they couldn't wait until the next planting season. If the contractor fails, you're done for. So if you let the problem develop to the point that you have no alternative if the contractor breaches the contract, then you T for D and go for damages. Given what you have said, there is no question in my mind that the breach would be material and would warrant a termination for default.

Your first question is the more important of the two and the more difficult to answer. The solution does not lie in writing a contract clause. The solution lies in selecting a contractor who has a good specific plan for making sure that the plants are ready and will be planted in time. That is not a matter of past performance (although past performance will be something to consider), but of the arrangements that the contractor can make to minimize the chance that the plants won't be ready or won't be put into the ground on schedule. You can find out about the competing offerors' plans in this regard by conducting oral presentations and asking them about those plans. You should also ask about their contingency plans. (What if the truck transporting the plants catches fire and all of the plants are destroyed? What's the fallback position?) If the plants and/or the planting will be subcontracted work, you might want to ask the offerors about what arrangements they will make for alternate subcontractors in case their first subcontractor goes belly up.

The next thing that you can do is to make your own advance contingency arrangements in case the contractor doesn't come through. This may entail locating an alternate source for the plants and the planting operation and discussing with them the possibility of their being willing and able to step in on a sole source basis (using the urgency exception) if the original contractor fails. You might want to develop and obtain approval for an acquisition plan for an emergency procurement in that event, that way you won't lose time while you wrangle with contracting and legal staffs at the last minute if you have to go into action.

The next thing that you can do is perform intensive contract administration with regard to the planting and the plants to makes sure you know at all times where the contractor stands with regard to that part of the work. You should be ready to step in to offer your assistance or take over at any time if it appears that the performance of that part of the work is threatened.

Even if you're already on contract, it's not too late to do some of these things. The key is for you to be proactive, and not to passively sit by while things happen around you.

By Vern Edwards on Tuesday, October 16, 2001 - 03:44 pm:

Anonymous:

P.S. Yes, you can get compensatory damages if the contractor defaults. If actual damages would be difficult to measure, then you should consider putting a liquidated damages clause in the contract.

Expect the worst and plan for it!

By joel hoffman on Wednesday, October 17, 2001 - 12:00 pm:

Dear "Newtothis on Tuesday, October 16, 2001 - 02:52 pm:"

What I meant was, in a situation where it doesn't make sense to terminate an entire contract or even a partial termination for failure to perform a small portion of the primary contract, you could write a provision in the specifications or statement of work which allows the Government an opportunity to delete the landscaping for lack of performance - it is a type of performance based contract provision. The contract is a bilateral agreement. If the offerors/bidders agree to the provision, they will submit a proposal or bid.

After award, if the Contractor performs, it gets paid. If it doesn't, it doesn't get paid and the specs should state that the Government reserves the right to procure the final landscaping, separately.

The definition of performance specifying includes an inherent requirement that satisfactory performance be verifiable. This is "quality assurance." You can certainly establish reasonable performance milestones, including early and intermediate checkpoints in the performance specification to verify that the plants are growing.

A safety valve could be a provision for temporary erosion planting, in the event that there is a failure to perform by the deadline. In that event, you can go, try again to grow the plants in time for the next planting opportunity.

These are just some thoughts about an outline for one approach.

I don't agree that the only option available is to terminate the contract for default. Performance based payments/ performance specifying are legal alternatives to termination and a heck of a lot cheaper, faster, and easier. Nobody wins in a TFD and it is a real big pain in the butt to have to do one. happy sails! joel

By Anonymous on Thursday, October 18, 2001 - 09:45 am:

I appreciate all the input, it should really help a lot. But without seeming to be too much of a pest, I have one more question. If the contract must be TFD'd due to failure to deliver, and there is no chance of reprocurement, how could LD's or actual damages be assessed?

By bob antonio on Thursday, October 18, 2001 - 10:01 am:

Anonymous:

You state you have a "vegetative planting requirement" for a "specific species of plant to be grown under stringent conditions." Has the plant been successfully grown before and provided in the timeframe of your requirement?

By joel hoffman on Thursday, October 18, 2001 - 11:16 am:

Anonymous, I don't understand the statement: "there is no chance of reprocurement". Are you saying that this is a temporary requirement - if it isn't there when needed, there is no future need for the landscaping?

...or it is a permanent requirement, but is one which can't wait until the next planting season, using temporary ground cover in the meantime?

If the plantings could be delayed until the next season, "TFD damages" would be the increased cost to reprocure next year, plus any temporary erosion control plantings required. However, I find it difficult to agree that you can TFD the whole contract for this, unless it is a real significant portion or purpose of the project.

Rather than TFD after the contractor fails to meet the requirement (assuming you don't want to be innovative and write into the RFP the performance based payments approach I described), you can order a deductive change to delete the requirement. The credit for the change would be the savings to the Contractor from not having to meet the contract requirements during the next planting season.

Another alternative might be to include liquidated damages provision in the contract - the administrative cost per day to keep the contract open, plus an allowance for additional cost to the owner for not meeting the date - temp plantings for erosion control? The basic contract should include the former, anyway. The latter could be an LD specifically associated with delays in plant establishement. happy sails! Joel

By Kennedy How on Thursday, October 18, 2001 - 11:56 am:

Joel,

I'm wondering if what he really means is that all of the previous work will go for naught if the landscaping isn't done in time. Basically, it sounds to me like those terraces will be washed away if the contracted-for ground cover isn't in place. You are then paying for work that won't be permanent, because nature will take it's course.

I can see why somebody would not want to pay X millions for something, have the contractor default, and lose whatever has been provided to date, because what was provided will be gone by the next year. However, I'm not sure if you can get away with not paying for something the contractor has already done, but I've heard of T4Ds that were initiated even though the contractor had partially completed part of the contract.

Kennedy

By Anonymous on Thursday, October 18, 2001 - 12:20 pm:

In the last five years we've had about 5 contracts for vegetative plantings. With the exception of a contract terminated about a month ago, all have been strictly vegetative. Out of the five contracts, one has been successfully completed. Probably due to a longer planting period than the others. Most of the contracts have a planting window of 2 to 3 months (6/1-7/31 or 6/1-8/31).

Also, all have been awarded from sealed bids. I guess it's time to begin making awards on factors other than price alone, i.e., past performance, technical capability, contingency plans, etc. This is an extremely new and unique business (planting native marsh plants in extremely remote areas of marsh only accessible by boat). Most of the companies who grow and/or plant have been recently formed just to handle the government's requirements.

By Anonymous on Thursday, October 18, 2001 - 12:26 pm:

An observation: If the situation is as Kennedy describes above I would say this is a case of not coupling work properly in the requirement. In a situation where all previous work is at risk due to a final stage requirement it would be wise to couple that finishing touch with the basic work.

In this case whoever built the terraces should have been on the hook to provide that last bit that preserves their work.

I've long been aghast and wryly amused at the "business sense" that sometime applies to division of work into separate contracts. It gets too little attention in my view. It is an analytical skill, even an art, that when done badly results in delivery of something that fails.

I first ran into this when seeing delivery of a large and urgent CB type radio order -- entirely forgetting the special frequency "crystals" upon which all depended. Fairly expensive little boxes sat on shelves while an entire operation had to do expensive work arounds. Someone had decided to order them from somewhere else and that had gotten lost in some SNAFU.

If the post planting season survival of these terraces depended on the these precise plantings or an emergency alternative those should have been in the critical path for the basic contract.

By bob antonio on Thursday, October 18, 2001 - 12:42 pm:

Anonymous:

If a contractor cannot produce and is faced with a firm-fixed price contract, a termination for default, and liquidated damages, it very well may become defensive. Regardless of the clause or provisions in a contract, something physically or financially impossible to do is a defense in court.

A one in five success rate is not very good and you mention that the successful one had more growing time. In constructing the requirement, I would consider this potential defense.

By Anonymous on Thursday, October 18, 2001 - 01:35 pm:

I've talked to my technical folks and they say there is nothing that can be temporarily placed on the terraces to protect them from the environment until the next planting season. The terraces are built in shallow brackish water and the only plants that could survive are those acclimatized to salt-water conditions. One of the "stringent" growing requirements happens to be a thirty-day salt hardening proceess that all plants are required to go through in order to be ready for the environment in which they are to be planted.

We have discussed including language that would invoke an automatic termination. Something that states that prior to the contractor beginning terrace construction operations the plants must meet a specific requirement by a stated date. If the requirement isn't met by that date the contract would be terminated for failure to perform. This would take out the chance of the Government having to pay for completed terraces.

Reprocurement is possible, but work under the new contract would be delayed until the next growing and planting season. It would involve accessing damages (actual) throughout the year until the work was complete. If there's nothing wrong with that then maybe were fine.

By Anonymous on Thursday, October 18, 2001 - 01:43 pm:

The prime contractor will be responsible for supplying the plants, building the terraces and planting the plants. The prime contractor will most likely be a heavy construction firm who will build the earthen terraces. There will probably be two subcontractors, a nursery that will grow and transport the plants and a planter who will place the plants on the terraces.

By Vern Edwards on Thursday, October 18, 2001 - 02:19 pm:

Why is everybody focusing on writing clauses to nail the contractor in the event of failure. Why isn't everybody discussing how to prevent the failure in the first place?

In the very first message in this thread Anonymous asked:

"Therefore, what can a C.O. do to ensure that the contractor meets the critical time requirements of the contract? Also, what action can the Government take if the contractor doesn't have the plants planted by the end of the planting time?"

The first question is the most important one, and the answer is not to write specification language and contract clauses!

The answer to the second question is simple: terminate for default.

Anonymous, you and the contractor have to discuss this problem openly, decide together on how to deal with it, and then to work together to make sure that your plan works. If the work is to be subcontracted, then include the subcontractors in the discussions.

By Anonymous on Thursday, October 18, 2001 - 02:24 pm:

Placing the burden on the prime makes me feel a lot better when the planting is actually the vital completion phase. It appears in this case that if the prime's subs don't perform the prime has not delivered anything.

Part of the purpose of a fixed price contract is to place the risk on the prime. Do so. Until delivery is made, ie., a completed terrace that includes the vital planting consider it a non delivery. What would you do if you had bought a truck load of computers FFP and they never showed at your facility? This should be treated much the same way as far as I'm concerned.

Now, if the thing is such that no contractor in their right mind would take the risks perhaps you've picked the wrong contracting method. This does not sound as if it is experimental or that risks are so ill defined that this is the case.

As someone pointed out, one of the best defenses against such non performance is proven past performance and a sound plan in evidence before selection. Since the growing of the plants necessary for completion is critical path for delivery those plans must be part of the critical selection consideration.

If you've already selected and in real trouble the treatment would seem to be as with any other contract where it has become evident the contractor has failed to deliver as required. That does not help get your delivery, but there should be little question the contractor failed to deliver as promised. They simply did "things" yet failed to perform.

By Anon2U on Thursday, October 18, 2001 - 09:56 pm:

With a 1 in 5 success rate and the fact that this is a new planting technique, the risks seem high. The government is trying to shift all the risk of non-performance on the contractors. It was stated that the contractors had been recently formed just to attempt this kind of work. Evidently they are willing to bid on the contract but don't realize how much risk they are taking and that they can be terminated without payment. If they did, I doubt they would have bid on the project (or their profit would be about 500% to cover the risk).

By bob antonio on Friday, October 19, 2001 - 06:58 am:

Anon2U:

Exactly. Vern is correct in stating the contracting officer and requiring activity should meet with the potential contractors and subcontractors. The requirement should be discussed to make sure everyone understands.

It doesn't matter what the requiring office wants if it is impossible to perform!

Once the contractors and subcontractors believe they can satisfy the requirement, the contract work should be based on observable performance and in this case that seems possible. The government observer should be able to determine satisfaction quickly and notify the contracting officer immediately so that contract performance can move forward.

The different stages of the process can be "fenced" in some manner similar to decision points on a system acquisition. Maybe using a simple "notice to proceed" from the contracting officer after certain performance is achieved makes sense. The contract should be written to match the requirement and performance should be viewed as a partnership with the contractor team. If the contractor fails, the government fails.

By joel hoffman on Friday, October 19, 2001 - 07:13 am:

Anon and Vern, I wasn't trying to focus on failure. I thought Vern made the point quite well that this should be best value, with past performance as a critical factor and some type of plan and interaction during performance. I was trying to interject some performance based specifications as an alternative to TFD. TFD should be a last resort. Performance based specifications REQUIRE both parties to have a plan to measure performance.

The project has finally been described in some coherent manner, revealing some of the problems - there has been only a 1/5 success rate, previous award by low bid, temporary plants are not an option, etc. By the earlier description, I thought this was a base beautification project to build terraces somewhere or something.

For this type project, a best value RFP is necessary. Evaluation criteria could include, for example, evaluation of the offeror's management plan, key subs, technical approach to the project, including growing and planting, quality and schedule control, past performance - especially important for the proposed nursery, if that has been a problem. I would also ask for a preliminary, outline schedule with the management plan. If key personnel would be a discriminator, based on past performance, I'd ask for the offeror's to identify them.

happy sails! joel

By Peggy Richter on Friday, October 19, 2001 - 11:21 am:

If the plants are critical, it seems to me that you want them FIRST. IE, you want to have the plants available ahead of time, to ensure they are there ON time. In other words, is there some way the plants could be grown and maintained in readiness for transplant ahead of the date they are actually due? I am not a plant expert, but it seems to me that if you HAVE to have 3" plants on May 20, then requiring 3" plants in March and allowing for 5" plants in May might be technically the better approach. I am NOT trying to get into a specification thing - the above is an example. If you are only having one success in 5 tries, it seems that somewhere someone has gotten too hidebound in the requirements or in how to get them done or in IF they can be done. If the one success was with a longer growing period, this should be a clue. There are a lot of ways to accelerate growing or to have a longer period for growing. The contracting end of it is to ensure that you HAVEN'T put in overly restrictive specs or requirements that would prevent this (think of it as obtaining "long lead items") and that you HAVE put in language that would at the best reward "preplanning" and at the worst not penalize it.

You might want to think about using phases wherein if the plants are not at stage X by date Y the terraces don't GO in, which would delay performance for a year (or at least a growing season) but eliminate the higher risk of putting something in that wouldn't survive the environment because it wasn't finished.

It seems to me you need to seriously talk to your tech folk.