Most aptly described as a legal fiction, the doctrine of constructive termination is invoked when the basis upon which the government contract was actually terminated is legally inadequate to justify the government’s actions. Stated another way, the doctrine of constructive termination is invoked to prevent the government’s breach of contract in case of an improper termination. Similar to termination for convenience, constructive termination is an option uniquely available to the government. The doctrine may be applicable as long as the contract, or a portion thereof, is actually terminated. Thus, in cases where the government has stopped the contractor’s performance for questionable or invalid reasons, the government’s actions can amount to a convenience termination under this doctrine. Notably, in such cases, the contractor is entitled to an amount it would otherwise be owed if the government had in fact terminated the contract for convenience. Consequently, the contractor may not recover for work not performed or any anticipatory profits. This means that fixed-price contracts or line items are essentially converted into a cost-reimbursement contract for the purposes of calculating the contractor’s recovery under the constructive termination.

The federal government has the right to unilaterally terminate contracts when it is in the government’s interest to do so. In the event of a termination for convenience, the contractor may typically submit its termination settlement proposal within a year of the termination. Since the contractor submits the settlement proposal primarily for negotiation purposes, it is not considered a claim under the Contract Disputes Act (CDA) when it is first submitted to the contracting officer (CO). Stated another way, the termination settlement proposal is considered an instrument of negotiation rather than a non-routine request for payment or a request for the CO’s final decision. For this reason, the costs of preparing a termination settlement proposal are also generally considered allowable. However, if the termination settlement proposal otherwise meets the requirements of a claim, it can be converted into a CDA claim if the parties’ negotiations reach an “impasse” and the contractor demands that the CO issue a final decision. In this context, an impasse means a deadlock or a point where a resolution through continued negotiations is unlikely when viewed from the perspective of an objective, third-party observer. Notably, whether the parties’ negotiations have reached an impasse is a question of fact, to be determined on a case-by-case basis.

While the Contract Disputes Act (CDA) does not define a claim, the Federal Acquisition Regulation (FAR) § 2.101 defines a monetary claim as a written demand or assertion by a contracting party seeking, as a matter of right, the payment of money in a “sum certain.” Since the sum certain requirement is not included in the CDA, the Federal Circuit has held that the requirement is non-jurisdictional. Stated another way, a CDA claim does not need to include a sum certain for the Court of Federal Claims (COFC) or a relevant Board of Contract Appeals to exercise jurisdiction over it. Instead, the sum certain requirement is considered an element of a claim for relief that the contractor must satisfy in order to recover. The distinction is important because parties may raise a motion challenging the Court’s or the Board’s jurisdiction at any time. Meanwhile, if a party presents a defense based on the sum certain requirement after litigation has far progressed, it may be deemed to have forfeited the defense entirely. Therefore, the sum certain requirement is a mandatory but non-jurisdictional claim processing rule that is subject to forfeiture. It is somewhat unclear exactly when the claims litigation progresses to a point where a party loses the right to challenge a deficient sum certain. However, the Federal Circuit has indicated that forfeiture may apply as soon as the merits of the case are evaluated, including after the summary judgment stage.