The Tower Contract Termination Proposal

Question 47: The Tower Contract Termination Proposal

Your role

You represent Quillstone Communications after the fictional National Relay Service terminated its tower-modernization contract for default. Quillstone contends that government access delays require conversion to termination for convenience. This is a drafting assignment. Prepare the settlement proposal while candidly addressing Quillstone's own delay and the government logs still needed.

Governing law

Assume the following rules apply:

1. Default termination is permitted when the contractor fails to meet a material schedule obligation and cannot establish that the delay was excusable, beyond its control, and without its fault or negligence.

2. Government-caused delay excuses performance only to the extent it affected the critical path and was not concurrent with unexcused contractor delay. The contractor bears the initial burden and must provide reasonably available notice and proof.

3. If a default termination is improper, it converts to termination for convenience.

4. A convenience settlement includes allowable performance costs incurred before termination, reasonable profit at the supplied rate on those performance costs, and reasonable settlement expenses, less disposal credits and prior payments. Anticipatory profit on unperformed work is excluded.

5. For this matter, the reasonable profit rate is 7 percent of allowable performance costs. No loss adjustment applies to the supplied cost schedule.

6. Costs caused solely by the contractor's unreasonable delay, rework, or failure to mitigate are unallowable. A disputed cost may be separately scheduled and reserved rather than included as established.

7. The contractor must stop work, protect government property, cancel or settle subcontracts reasonably, inventory materials, mitigate continuing cost, and certify the proposal accurately.

8. The government must preserve and produce records reasonably necessary to evaluate a documented access-delay defense. The contractor may seek schedule logs, site-access records, directives, and communications.

9. Under a default termination, the government may seek excess reprocurement cost. A negotiated conversion may resolve both the contractor settlement and the government's default claim.

10. A settlement proposal may preserve liability arguments and propose conversion without falsely denying contractor-caused delay shown in the contractor's own records.

Facts

The National Relay Service awarded Quillstone a $12 million contract to modernize 40 remote towers. A critical milestone required completion of the first 20 towers by June 30.

Quillstone completed 16 by June 30 and reached 20 on August 8, 39 days late. Its internal critical-path analysis allocates the 39 days as follows:

• 19 days from Quillstone's late selection of a radio supplier after its first choice failed credit review.
• 12 days from alleged government denial of mountain-site access while a separate agency conducted wildfire work.
• 8 days from severe weather that may qualify as excusable if the daily site records support it.

The 19 supplier days are not excusable. Quillstone sent contemporaneous emails about the access denial, but the government has not produced gate logs, wildfire directives, or its internal schedule. Quillstone's weather records are complete. The supplied record does not establish whether the 12 access days were on the critical path, overlapped the supplier delay, or were directed by the government.

The government issued a ten-day cure notice on July 5. Quillstone responded with a recovery schedule but did not separate contractor and government delay. The government terminated for default on August 15 and announced an intent to reprocure.

Quillstone's certified cost schedule states:

• Allowable performance costs incurred before termination: $6,800,000.
• Disposal credit for reusable materials: $300,000.
• Reasonable settlement expenses: $220,000.
• Prior progress payments: $5,400,000.
• A separate $420,000 idle-labor claim tied to the alleged access denial, not included in the $6,800,000 and not yet supported by government logs.

The government has not alleged that the established $6,800,000, $300,000, $220,000, or $5,400,000 figures are inaccurate. Quillstone has stopped work, preserved government equipment, and begun subcontract closeout.

Assignment

Draft a final conversion and convenience-termination settlement proposal that:

• Acknowledges the 19 days of contractor-caused delay without conceding that default was proper.
• States the access-delay and weather positions accurately.
• Demands the specific government records needed to determine critical-path and concurrency issues.
• Computes profit and the net convenience settlement from the established cost schedule.
• Separately reserves the unsupported $420,000 idle-labor claim rather than presenting it as established.
• Confirms mitigation, inventory, subcontract closeout, property protection, and certification.
• Proposes conversion to convenience, payment terms, mutual resolution of excess reprocurement claims, and a timetable for exchanging the missing records.
• Avoids anticipatory profit and any denial contradicted by Quillstone's own delay record.

Q47 key (Tower Contract Termination Proposal)

1. Candidly acknowledge the 19 supplier days as Quillstone-caused. The 8 weather days may be excusable on complete records; the 12 access days remain conditional on critical path and concurrency. Missed: the proposal denies its own schedule and loses credibility.
2. Demand gate logs, wildfire directives, site-access records, internal schedules, and communications needed to determine whether the 12 days were government-caused, critical, and nonconcurrent. This fact is deliberately unresolved. Missed: conversion is demanded without the proof that could support it.
3. Established profit is 7 percent of $6,800,000 = $476,000. Established convenience settlement is $6,800,000 + $476,000 + $220,000 - $300,000 - $5,400,000 = $1,796,000. Missed: the settlement number is materially wrong.
4. The $420,000 idle-labor item must be separately reserved, not included as established, pending government logs and allowability proof. Missed: an unsupported claim contaminates the certified proposal.
5. Confirm stop-work compliance, mitigation, property protection, inventory, subcontract closeout, disposal credit, and accurate certification. Missed: allowable recovery is reduced by post-termination failures.
6. Propose conversion to convenience, payment of $1.796 million, a defined record exchange and supplement period, and mutual release of excess reprocurement and default claims upon payment. Missed: the proposal seeks money without resolving the government's counterexposure.
7. Do not claim anticipatory profit or deny the late supplier choice. If records do not establish nonconcurrent government delay sufficient to defeat default, Quillstone must reassess settlement leverage rather than certify a false conversion theory. Missed: the client turns an arguable delay case into a false claim problem.