“Horror Story:” Ghost of a Long-Ago Termination You can lose even if you win. A Michigan security guard contractor has learned that lesson the hard way. In 2001 GSA terminated its contract with NCLN20 Inc. for default before the company had even begun performing the work. Nearly 10 years later the U.S. Court of Federal Claims found that the default termination was unlawful, but awarded NCLN20 just $46,856, plus interest. The law firm Jackson Kelley calls the case “a veritable ‘horror story’ of what can happen to a small-business contractor that is not fully ready to perform and that expects—perhaps based on its past experience with agency contracting personnel—that a ‘friendly’ contracting officer (CO) will exhibit patience towards the contractor.” On Aug. 24, 2001—note the date—GSA awarded NCLN20 a fixed-price contract worth up to $33 million, including options, to provide security at federal buildings in Michigan. The company was to start work Oct. 1. Then Sept. 11 happened. Ten days later a Federal Protective Service employee was shot and killed in the Detroit federal building, one of the locations NCLN20 would be guarding. Responding to heightened security concerns, GSA ordered the company to provide at least 19 additional guards, with no increase in payments. GSA contracting officers realized, belatedly, that NCLN20 did not have a Michigan license to provide security guards, nor enough guns and permits to arm the guards. Documents filed in the lawsuit reveal that one contracting officer expressed “grave doubts” that the company would be ready to take over building security on Oct. 1. On Sept. 26 GSA warned NCLN20 that it was in danger of default if it did not cure those deficiencies. Just two days later GSA terminated the contract for default. GSA’s inspector general, after reviewing the case, found that the agency did not provide NCLN20 with an adequate startup period, as required by the RFP, and did not give the company 10 days to cure its deficiencies, as required by the Federal Acquisition Regulation. NCLN20 filed suit in 2002, alleging wrongful termination. It also charged that one administrative contracting officer was motivated by racial prejudice and was getting revenge against the company for an earlier contract dispute. According to court documents, Judge Susan Braden of the federal claims court took the unusual step of attending that contracting officer’s deposition so she could assess his credibility. She later found no evidence of bad faith, but commented that his style of communication was “inept, argumentative and unprofessional.” As the case crawled through the court, delayed by legal maneuvering and the illness of NCLN20’s attorney, GSA in 2007 converted the termination by default to a termination for the convenience of the government. Finally, on July 21, 2011, Judge Braden ruled that the original default termination was unlawful because GSA had not given the required 10 days’ notice before declaring default. But she said the 2007 termination for convenience was proper. The court also upheld GSA’s decision to require additional guards without additional payment. In its analysis, the Jackson Kelley law firm said that illustrates “the dangers of requirements contracts.” “So where does this leave the small-business contractor?” Jackson Kelley asked. “After nearly nine years of litigation, NCLN20—or what is now left of it—recovered its start-up costs of $46,856 with interest (plus interest on some delayed payments under a second contract).  “Here’s the message for contractors, particularly small ones: don’t overpromise, count on getting favorable treatment from the CO to relieve you of contract requirements, and remember that [a lawsuit]—even if ‘successful’—may not result in a meaningful recovery.”