Due to the fact that the government must keep good relations with the few interpreters in the region, can the government supply monetary compensation for the contract being terminated to the vendors? If so, can the government offer a fixed percentage in the contract due to termination for convenience based on changes in the requirement? Lastly, is there any FAR guidance that sates that we may offer consideration to vendors without there any work actually being performed?
This is a very interesting question.
Open full Question Details
I’ll answer your last question first. There is NO FAR guidance on providing consideration to vendors without there any work actually being performed. Because; it is not allowed as it would violate multiple appropriations laws (like bona fide need, purpose statute, etc.), refer to Chapter 3 of your Defense Contingency Contracting Handbook, version 4 dated October 2012.
That said, what constitutes “actual work being performed” could mean many different things.
It’s also difficult to determine how contractors are losing money on termination for convenience settlements. Guidance is found at FAR 12.403(a), (b) and (d) as well as 52.212-4(l) if this is a commercial contract (note you may also use FAR 49 for guidance) and FAR 49.2 if this is not a commercial contract and it is fixed price. Additional cost principles for allowable costs may be found at FAR 31.205.
It appears (and again we do not know ALL of the facts), these vendors/interpreters are claiming they are losing money, but what they really are losing is opportunity costs and/or lost profits, neither of which is an authorized settlement expense. They may even be using “emotional tactics” to better their negotiation positions….From first-hand experience I know that in your deployed location the vendors should know by now the risk they take when entering a U.S. government contract (i.e. the risk of a T4C) and would have made the business decision to accept that risk already. I’d be willing to bet the terms and conditions they receive under a contract with the U.S. government exceeds what they could achieve on their open market. These “emotional negotiation tactics” are often used by local vendors after a RIP-TOA (relief in place – transfer of authority) to see how flexible the “new” contracting officer will be.
Back to the basics… The purpose of a termination for convenience settlement proposal is to reasonably reimburse the contractor for any allowable, allocable and reasonable costs actually incurred during performance and in executing the termination (settlement expenses) as well as a reasonable profit. It is not to make them completely whole in the event they had forgone another business opportunity to accept this contract. I doubt there is any other entity in the world who would agree to a settlement in that regards, including civilian courts under breach of contract cases.
Without knowing all of the facts and what the market conditions are at your deployed location, it seems like an alternate contract method/action could be more suitable for acquiring these same interpreters and linguists without the need to enter a termination when the government’s requirement changes, or fluctuates. Contractors entering a situation already knowing government requirements may vary or fluctuate should be better prepared to have alternate options (outside of the government contract).