New government contractors are often surprised to learn that a standard clause in federal contracting gives the government the right to terminate contracts for convenience.  In day-to-day discussions, it is not uncommon for government contractors to think of termination for convenience as equivalent to termination without cause, as opposed to “for cause” termination for default.  However, the Court of Federal Claims’ recent decision in Tigerswan, Inc. v. United States, No. 12-62C (Sept. 18, 2014), reiterates the doctrine that the government’s discretion is not boundless when exercising its right to terminate contracts for convenience.

TigerSwan arose from a security services contract to support the Task Force for Business and Stability Operations in Iraq (TFBSO).  The contracting officer terminated the contract for convenience, and the contractor sought lost profits, alleging a wrongful termination.  The contractor argued that the Department of Defense’s contracting officer abdicated his responsibility to make an independent decision and failed to conduct an independent investigation of the facts, and instead deferred entirely to the TFBSO.  Denying cross-motions for summary judgment, the court wrote that “while a CO is afforded wide discretion, he is still responsible for making an independent decision with regard to a contract” and that “the CO’s failure to make an independent decision weighs in favor of finding an abuse of discretion.”  Although the court did not reach an ultimate conclusion with respect to liability, the contracting officer’s unquestioning reliance on another agency raised significant doubt that the termination for convenience was reasonable and suggested that the termination was the result of an abuse of discretion.

An agency’s decision is normally conclusive in the absence of bad faith or an abuse of discretion.  Caldwell & Santmyer, Inc. v. Glickman, 55 F.3d 1578, 1581 (Fed. Cir. 1995).  However, TigerSwan and other recent cases demonstrate that contractors have options where an agency abuses its discretion in terminating a contract.  See also Gulf Grp. Gen. Enters. Co. W.L.L. v. United States, 114 Fed. Cl. 258, 393 (2013) (holding that the plaintiff was entitled to lost profits where government terminated for convenience “without establishing a legitimate basis for doing so.”).

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Photo of Scott A. Freling Scott A. Freling

Scott is sought after for his regulatory expertise and his ability to apply that knowledge to the transactional environment. Scott has deep experience leading classified and unclassified due diligence reviews of government contractors, negotiating transaction documents, and assisting with integration and other post-closing…

Scott is sought after for his regulatory expertise and his ability to apply that knowledge to the transactional environment. Scott has deep experience leading classified and unclassified due diligence reviews of government contractors, negotiating transaction documents, and assisting with integration and other post-closing activities. He has been the lead government contracts lawyer in dozens of M&A deals, with a combined value of more than $76 billion. This has included Advent’s acquisition of Maxar Technologies for $6.4 billion, Aptiv’s acquisition of Wind River for $3.5 billion, Veritas Capital’s sale of Alion Science and Technology to Huntington Ingalls for $1.65 billion, and Peraton’s acquisition of Perspecta for $7.1 billion.

Scott also represents contractors at all stages of the procurement process and in their dealings with federal, state, and local government customers. He handles a wide range of government contracts matters, including compliance counseling, claims, disputes, audits, and investigations. In addition, Scott counsels clients on risk mitigation strategies, including obtaining SAFETY Act liability protection for anti-terrorism technologies.

Scott has been recognized by Law360 as a MVP in government contracts. He is a past co-chair of the Mergers and Acquisitions Committee of the ABA’s Public Contract Law Section.

Photo of Nooree Lee Nooree Lee

Nooree advises government contractors and financial investors regarding the regulatory aspects of corporate transactions and restructurings. His experience includes preparing businesses for sale, negotiating deal documents, coordinating large-scale diligence processes, and navigating pre- and post-closing regulatory approvals and integration. He has advised on…

Nooree advises government contractors and financial investors regarding the regulatory aspects of corporate transactions and restructurings. His experience includes preparing businesses for sale, negotiating deal documents, coordinating large-scale diligence processes, and navigating pre- and post-closing regulatory approvals and integration. He has advised on 35+ M&A deals involving government contractors totaling over $30 billion in combined value. This includes Veritas Capital’s acquisition of Cubic Corp. for $2.8 billion; the acquisition of Perspecta Inc. by Veritas Capital portfolio company Peraton for $7.1 billion; and Cameco Corporation’s strategic partnership with Brookfield Renewable Partners to acquire Westinghouse Electric Company for $7.8+ billion.

Nooree also counsels clients navigating the Foreign Military Sales (FMS) program and Foreign Military Financing (FMF) arrangements. Nooree has advised both U.S. and ex-U.S. companies in connection with defense sales to numerous foreign defense ministries, including those of Australia, Israel, Singapore, South Korea, and Taiwan.

Recently, Nooree’s practice has expanded to include advising on the intersection of government procurement and artificial intelligence. Nooree counsels clients on the negotiation of AI-focused procurement and non-procurement agreements with the U.S. government and the rollout of procurement regulations and policy stemming from the Executive Order on Safe, Secure, and Trustworthy Artificial Intelligence.

Nooree maintains an active pro bono practice focusing on appeals of denied industrial security clearance applications and public housing and housing discrimination matters. In addition to his work within the firm, Nooree is an active member of the American Bar Association’s Section of Public Contract Law and has served on the Section Council and the Section’s Diversity Committee. He also served as the firm’s Fellow for the Leadership Council on Legal Diversity program in 2023.