What recourse does the government have when we have accepted work accomplished on a progress schedule, but it is not to specifications?
This answer is based solely on the information submitted. Attempts to reach the question submitter for additional information was unsuccessful. The e-mail address provided did not work and I have no ability to make a DSN call to the number provided... so I hope they log on to see and read this answer as they will not get the automated notice.
First and foremost, we recommend you reach back to AFCENT contracting and contracting legal staff for their advice and opinions.
Assumptions based on background provided:
a) contractor is a foreign firm and not a foreign government (see FAR 33.203(b) and DFARS 236.273),
b) contract contains FAR 52.246-12,
c) contract contains FAR 52.232-5, and
d) contract contains FAR 52.233-4 and DFARS 252.233-7001
Unfortunately, we do NOT know if the contracting officer determined the water tank effort could be accepted separately (see FAR 52.246-12(i)) and that the government did perform final acceptance on it.
Or if it was only invoices that were certified for payment purposes based on the “progress scheduled” mentioned and required by the payments clause FAR 52.232-5.
If it is the former (acceptance was done) then there are limited possible courses of action to take.
1) In the event your customer wanted to proceed with the tank and your contract contains FAR 52.246-21 Warranty of Construction; that would be one approach. Note: it used to be standing practice to include this clause in construction contracts in your AOR even if not using warranties contained in Federal, military, or construction guide specifications (see DFARS 246.704(1)(iv)), but I was not able to determine if that was still AFCENT policy.
2) But because your customer has stated they “no longer wish to proceed with that type of tank”, then the warranty option is not available even if you have the clause. Another potential recourse you have can be found in FAR 52.246-12(h). It states the contractor shall “defray the expense of examination and reconstruction”. In the event there is not enough funds to defray costs you could proceed with an offset against another contract this contractor has (if they do); see FAR subpart 32.6... but see FAR 32.004).
If the government has not formally accepted the water tank separately from the rest of the project. Then you have the Inspection Clause and the Payment Clause for recourse. See FAR 52.232-5(f). Also see FAR 52.246-12 paragraphs (f) or (g) depending on your specific facts.
Should the contractor disagree or dispute and not want to conform to the citations above, the Contracting Officer could file a claim against the Contractor (see FAR 52.233-1(d)).