Reprocurement Considerations Following Default Terminations

August 6, 2026 Sareesh Rawat, Esq.

Procuring agencies have significant discretion when repurchasing products or services after a termination for default under a substitute contract, since the federal statutes and regulations that govern standard procurements do not strictly apply to reprocurements. As the default provision applicable to fixed-price contracts, Federal Acquisition Regulation (FAR) 49.402-6 governs most reprocurements. For commercial products or services purchased through the General Services Administration (GSA) Federal Supply Schedule (FSS) program using FAR Part 8 procedures, FAR 49.402-6 serves only as guidance unless it conflicts with specific commercial item acquisition procedures. Notably, FAR 8.406-4(a)(1) mandates compliance with FAR 12.403 for FSS commercial item acquisitions, which in turn grants the procuring agency all remedies available to commercial buyers when conducting a reprocurement. The government’s preferred remedy after a default termination under the FAR is to acquire similar items from another contractor. The government may reprocure from the next-lowest-priced, qualified offeror as long as there is an ongoing need for the products or services and only a short time has passed between the original competition and the termination. In conducting the reprocurement, the agency must still provide competition to the maximum extent practicable, and the period of performance under the reprocurement must not exceed the term remaining on the terminated contract. Furthermore, for GSA FSS reprocurements, the agency is only required to acquire items similar to those in the original solicitation, not necessarily identical.

In B-418224; B-418224.2, a decision issued on January 31, 2020, the Government Accountability Office (GAO) sustained a protest challenging a reprocurement contract award, as the performance period of the repurchased services was greater than the undelivered term remaining on the original contract terminated for default. The Defense Information Systems Agency (DISA) issued the original order for communications infrastructure design, implementation, and sustainment services pursuant to FAR Part 8 with competition restricted to HUBZone small businesses holding the GSA Schedule 70 FSS contract. The original order, which was awarded on a lowest price technically acceptable (LPTA) basis to a vendor with a quoted price of $34,461,714, had a six-month base period followed by two one-year options. After a little over three and a half months of performance, DISA terminated the order for default due to the contractor’s inability to meet staffing requirements. The agency then issued a task order with the same term as the original order to the vendor with the next lowest price of $47,362,819, after the vendor extended the validity of its original quotation. In the protest that followed, the protester, which had quoted the highest price of $54,326,287, raised various allegations, including concerns about the length of the reprocured order. In this regard, the protester maintained that DISA had effectively conducted a new acquisition by ordering more than the undelivered services remaining on the original terminated order.

The GAO agreed with the protester and sustained the protest on this basis, noting that while the agency had considerable discretion to repurchase goods and services under a substitute contract, that discretion was more limited when the reprocurement exceeded the undelivered quantity remaining on the original contract. The decision pointed out that while DISA was not required to follow the provision at FAR 49.402-6 for the reprocurement because the acquisition was conducted pursuant to FAR Part 8 procedures, the agency was nevertheless subject to some of the same restrictions included in that provision. One of those applicable restrictions limited the agency’s repurchase authority to the undelivered term remaining on the original order. Since the defaulted contractor had performed about three and a half months of the six-month base period on the original order, the total term of the reprocured order, including the two one-year options, could not exceed approximately 26 and a half months. Although the GAO sustained the protest, it rejected the protester’s argument that including the two option periods in the reprocurement required citing unusual and compelling circumstances, since FAR 49.402-6 did not apply. Ultimately, the GAO concluded that the replacement order improperly exceeded the time remaining for performance under the original order, as the agency failed to account for the three and a half months of performance by the defaulted contractor.

While the government must ensure that the GSA FSS commercial item reprocurement does not exceed the undelivered quantity or term remaining on the original contract, it need not use an identical solicitation or even acquire identical items if the reprocured items are sufficiently similar to those in the original terminated order. In B-422717.4; B-422717.5, a decision issued on April 23, 2026, the GAO denied a protest challenging the United States Department of the Treasury’s (USDT) reprocurement of operations and maintenance services for integrated security systems following a default termination of the original GSA FSS task order set-aside for 8(a) small businesses. After the termination due to the original contractor’s failure to provide its proposed key personnel in a timely manner, the USDT issued an amended request for quotation (RFQ) to the next eligible vendor. In the amended RFQ, the USDT removed one position and added one position, although neither position was a key personnel position. Additionally, the agency removed the requirement to procure certain licenses that had already been obtained during the defaulted contractor’s performance. Upon receiving a revised quotation from the next eligible vendor, the agency awarded it the reprocurement order. The defaulted contractor filed a protest challenging the agency’s actions relating to the reprocurement. Although the protester was the defaulted contractor, the GAO declined to dismiss the protest because the contractor could be eligible to compete under certain acquisition approaches if the protest were sustained.

The protester argued in pertinent part that the USDT had conducted the reprocurement using an RFQ that was materially different from the original RFQ. Meanwhile, the agency maintained that it had properly issued the reprocurement to the next eligible GSA FSS vendor, as the changes in the amended RFQ were not significant and its basic needs remained the same. The GAO agreed with the agency, noting the applicability of FAR 12.403(c)(2) to the instant procurement, which states that the preferred remedy is for the agency to acquire similar items from another contractor. In this connection, the USDT had removed one position and added one position in the amended RFQ, neither of which was a key personnel position. The only other change was the elimination of the requirement to acquire certain licenses already obtained under the defaulted contract. Furthermore, almost all important aspects of the RFQ, including the performance work statement (PWS), level of effort (LOE), locations of performance, and labor categories, remained unchanged. The GAO also noted that before issuing the reprocurement order, the agency documented a contemporaneous finding that the replacement contract was of similar size and scope as the terminated contract. In relying on these facts, the GAO concluded that USDT’s decisions to issue an amended RFQ, obtaining a revised quotation from the next eligible vendor, and later awarding it the reprocurement order aligned with FAR’s preferred remedy for acquiring similar items from another contractor. The protest was dismissed as the agency was not required to use an identical solicitation or acquire identical items under the replacement GSA FSS order.

When reprocuring after a termination for default, the procuring agency may exercise considerable discretion in selecting its repurchase strategy, as the rules governing standard federal procurements are not strictly applicable. In this regard, as long as the reprocurement does not exceed the undelivered quantity or term remaining on the original terminated contract, the agency may use any acquisition method that provides for competition to the maximum extent practicable. For reprocurements of GSA FSS orders, the provision at FAR 49.402-6 applies only as guidance, with procedures in FAR Part 8 and FAR Part 12 governing. Under FAR 12.403(c)(2), the preferred remedy is for the procuring agency to acquire similar items from another contractor. In its previous decisions, the GAO has held that a reprocurement is reasonable when the agency issues the repurchase award to the next-lowest-priced, qualified offeror under the original solicitation at its original price. However, as demonstrated in the case immediately above, this is not the only reasonable method of conducting a reprocurement. Given the agency’s considerable discretion in this area and the language in FAR 12.403(c)(2) regarding the acquisition of similar, not necessarily identical, items from another contractor, certain changes may be appropriate, provided the reprocured FSS order is not meaningfully different from the original order that was terminated for default.

This Federal Procurement Insight is provided as a general summary of the applicable law in the practice area and does not constitute legal advice. Contractors wishing to learn more are encouraged to consult the TILLIT LAW PLLC Client Portal or Contact Us to determine how the law would apply in a specific situation.

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Jurisdictional Considerations in Appeals Challenging Terminations for Default

June 7, 2024 Sareesh Rawat, Esq.

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.

Demonstrating Changed Circumstances to Avoid Terminations for Default

August 10, 2024 Sareesh Rawat, Esq.

The government retains the right to terminate a contract for default when the contractor fails to meet its performance obligations. The default termination, commonly considered one of the most undesirable outcomes for contractors, may nevertheless be converted into a termination for the government’s convenience if, on appeal, the government fails to prove that its default termination decision was justifiable. Notably, when the contractor appeals the government’s decision to terminate its contract for default, it is the government’s burden to prove default termination in the first instance. In other words, the government must demonstrate the correctness of its actions in terminating a contract for default. When contract modifications change the terms of the original contract such that the government’s default termination decision is no longer justified under the modified contract, adjudicative forums will typically convert the default termination to one for the convenience of the government, citing the change in circumstances from contract award to termination.

The Armed Services Board of Contract Appeals (ASBCA) in ASBCA 58866 and ASBCA 58867 converted the Army’s terminations for default for two similar contracts into terminations for convenience due to changes in the terms of the contracts due to later modifications. The Army awarded the underlying contracts for the acquisition of thousands of foreign language test items to assess the proficiency of military linguists. The contracts included the Federal Acquisition Regulation (FAR) 52.212-4 clause: “Contract Terms and Conditions—Commercial Products and Commercial Services.” During the performance, the government was only responsible for paying for the items it accepted, with no apparent definition of what constituted an acceptable item, presumably leaving the acceptability determination at the government’s discretion. The government retained intellectual property rights in both accepted and rejected items as the contracts provided the government sole ownership and exclusive rights to the deliverables. After the contracts were awarded to the same contractor, the Army issued nearly identical modifications, stating that any foreign language test items still required under the contracts but not accepted by the government would be “automatically descoped” from the contract. The Army eventually terminated the contracts for default, citing the contractor’s failure to provide the agreed-upon number of acceptable items.

Demonstrating Bad Faith and Abuse of Discretion in Default Terminations

July 9, 2026 Sareesh Rawat, Esq.

The government has the right to terminate a contract under the default clause for the contractor’s unexcused failure to meet its performance obligations. In making the default termination decision, it is the responsibility of the contracting officer (CO) to exercise sound business judgment while generally considering the seven factors listed in Federal Acquisition Regulation (FAR) 49.402-3(f), including the totality of the circumstances. Once default is established, the burden shifts to the contractor to prove that its failure to meet contractual obligations was excusable. Although in the vast majority of cases the government’s decision to terminate for default is considered proper if the government has a right to terminate and the appropriate termination procedures are followed, there may be instances where the government’s motive to terminate may be implicated, such as when agency actions surrounding the termination amount to bad faith in the administration of the contract. In such cases, the contractor must present evidence that the government had some specific intent to injure it to overcome the presumption that government officials act in good faith. Such evidence showing a specific intent to injure the contractor satisfies the well-nigh irrefragable proof standard that must be met to show the government’s bad faith. This standard is considered higher than the legal standard necessary to prove arbitrary and capricious decisions of the government. Thus, if the contractor can establish that the government had some specific intent to injure it, the termination decision, if tainted by bad faith, may be considered arbitrary and capricious and the default termination may be converted into one for the government’s convenience.

Excess Costs of Reprocurement Claims and the Fulford Doctrine

July 16, 2026 Sareesh Rawat, Esq.

The government has the right to terminate, in whole or in part, a government contract pursuant to the default clause when the contractor fails to perform its contractual obligations. The government may charge the defaulting contractor any excess costs it incurs in procuring replacement products or services beyond the contract price. Under Federal Acquisition Regulation (FAR) 49.402-6, the contracting officer (CO) must repurchase the same or similar products or services against the defaulted contractor’s account as soon as practicable at as reasonable a price as practicable. If the repurchase is made at a price exceeding the price of the terminated products or services, the CO must issue a written demand to the defaulting contractor for the total amount of the excess. In order to establish an excess costs of reprocurement claim, the government must demonstrate that: (1) the reprocured supplies are the same as or similar to those involved in the termination; (2) it actually incurred the excess costs; and (3) the government acted reasonably to minimize the excess costs resulting from the default termination. If the government is unable to establish these elements, it may still proceed under a breach of contract theory, but it must then carry the heavier evidentiary burden of proving actual damages rather than relying on reprocurement costs. Significantly, the government’s claim for excess costs of reprocurement is considered distinct from the government’s default termination claim, and thus, has its own six-year statute of limitations once the excess reprocurement claim accrues under the Contract Disputes Act (CDA).

Reprocurement Considerations Following Default Terminations

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