The presumption of good faith presumes that government officials carry out their obligations during the performance of a government contract in good faith. The presumption is at its strongest when contractors allege quasi-criminal wrongdoing by government personnel acting in the course of their official duties. To overcome the presumption of good faith in this context, contractors must present “well-nigh irrefragable” proof. In other words, contractors must present evidence that cannot be refuted or disproved. Compared to the three standards of proof generally recognized by courts, the “well-nigh irrefragable” proof standard is the closest to the clear and convincing standard. This standard imposes a heavier burden on the contractor than imposed by the preponderance of the evidence standard but a somewhat lighter burden than requiring proof beyond a reasonable doubt, reserved for criminal cases. Clear and convincing evidence has also been described as evidence that produces an abiding conviction in the mind of the judge that the truth of the factual contention is highly probable.

The presumption of good faith can be difficult to overcome when applied in the context of allegations of quasi-criminal wrongdoing by government officials. Nevertheless, contractors may meet the “well-nigh irrefragable” proof standard if they present evidence of the government’s specific intent to injure the contractor. Such evidence may include government actions that amount to bad faith. Bad faith actions are motivated by malice, animus, conspiracy, or otherwise part of a course of governmental conduct designed to be oppressive. In the absence of evidence of the government officials’ specific intent to injure it, the contractor will find it challenging to overcome the strong presumption that the government’s administrative actions are correct and taken in good faith. Overcoming the presumption of good faith may be particularly difficult when a significant amount of time has passed between the occurrence of the underlying events and the contractor’s subsequent allegations of bad faith.

Due to the highly regulated nature of federal government contracts, their formation and administration are governed by a well-defined set of rules. Despite this, government contracts rely on a foundation of mutual trust and cooperation between the government and its contractors. Parts of this invisible layer of obligation are embedded in the implied duties of cooperation, good faith, and fair dealing. Therefore, while related and somewhat interchangeable concepts, these implied duties are inherent to all government contracts and help ensure a successful, productive, and professional relationship between the contracting parties. However, from time to time, the Government may violate these implied duties, giving rise to contractor claims. Understanding these duties empowers contractors to navigate potential issues by identifying causes of action for Government breaches that result in disruption in performance or monetary damages. Therefore, a general discussion distinctly describing these obligations may be helpful to contractors alleging Government violations during contract performance.

o Duty of Cooperation

The Government’s duty to cooperate during the performance phase is as inherent to a government contract as the Government’s right to expect performance in accordance with specifications. Since both parties are required to work together as partners to achieve common contractual objectives, a lack of cooperation during performance by the Government may, and often does, become a source of disputes. When facing scenarios where contractors suspect a lack of adequate cooperation by the Government, they should evaluate the Government’s conduct in the context of the contract’s overall objectives. If the conduct at issue is inconsistent with the Government’s stated mission needs or hinders the contractor’s performance, the Government may be in breach of its duty of cooperation. The Government’s duty to cooperate during performance may be viewed independently by adjudicative forums in accordance with the facts at issue or in contrast with its treatment of other similarly situated contractors. Understanding the government's duty to cooperate empowers contractors to identify potential roadblocks and seek redress for hindered performance.

The government may terminate a federal contract if the contractor fails to meet its contractual obligations. The contracting officer (CO), in such cases, issues a final decision terminating the contract for default and outlines the reasons for the default. In the event of a termination for default, the government is only liable to the contractor for the portion of the contract that was already performed. While the CO may exercise discretion to terminate a contract for default, such a decision is appealable to the Board of Contract Appeals or the Court of Federal Claims (COFC) pursuant to the Contract Disputes Act (CDA). The CO’s decision to terminate may be set aside by the adjudicative forum if it is arbitrary, capricious, or constitutes an abuse of the CO’s discretion. For instance, a decision to terminate for default may be arbitrary and capricious if there is a lack of nexus between the CO’s decision to terminate the contract for default and the contractor’s performance on the contract. In such situations, while the concerned adjudicative forum may lack the ability to provide injunctive relief, it may nevertheless convert the CO’s default termination to one for the government’s convenience.

As a sovereign and a contracting party, the government holds the prerogative to terminate a government contract, either partially or completely, whenever it is in its best interest. While a contractor may pose certain challenges to the CO’s decision to terminate a contract, it is generally accepted that the government’s rights in this regard are practically limitless. The Federal Acquisition Regulation (FAR) outlines the methods through which the government may settle contracts it terminates for its convenience. Specifically, under FAR § 49.103, the government may settle contracts terminated for convenience through negotiated agreement, CO’s determination, costing-out under vouchers for cost-reimbursable contracts, or through a combination of these methods. Typically, when the government exercises its right to terminate a contract for convenience, it enters into a settlement agreement with the prime contractor. In turn, prime contractors are required to settle any subcontractor termination settlement proposals.

Once the government issues a notice terminating a contract for convenience, the prime contractor must terminate all subcontracts related to the terminated portion of the prime contract. Under FAR § 49.104, prime contractors are required to settle all outstanding liabilities that arise out of the termination of subcontracts and promptly notify the CO of any legal proceedings that may be instituted by a subcontractor. Additionally, FAR § 49.108 generally outlines the parties’ rights, obligations, and procedures pertaining to subcontractor settlement proposals. Notably, FAR § 49.108-2(b) makes it abundantly clear that the government’s rights to terminate the contract for convenience are unaffected by a prime contractor’s failure to include an appropriate termination clause in a subcontract. Therefore, contractors should review the termination clause of their subcontract agreements to ensure their rights are adequately protected in case of a termination for the government’s convenience.