Lisbon Contractors, Inc. v. The United States

Rule of Law:

In a government contract dispute arising from a termination for default, the government bears the burden of proof to demonstrate that the termination was justified, regardless of whether the case is before a Board of Contract Appeals or in a direct access action in the U.S. Claims Court.

Facts:

• On August 8, 1979, Lisbon Contractors, Inc. (Lisbon) entered into a contract with the United States Soil Conservation Service (SCS) to construct a flood control channel and bridge.
• During the project, Lisbon encountered difficulties, including poor performance by its concrete subcontractor, Versatile Constructors, leading to numerous complaints from the SCS about supervision, quality, and progress.
• In response to SCS's concerns, Lisbon terminated its subcontractor, appointed its vice president as an acting superintendent, and corrected specific work deficiencies identified by SCS.
• Lisbon requested a meeting on April 30, 1980, to resolve outstanding issues, including a revised construction schedule and a requested change in concrete form specifications (the 'sleeper joint' issue).
• During the April 30th meeting, a heated argument erupted over the 'sleeper joint' issue, after which SCS representatives caucused for twenty minutes.
• Immediately following their caucus, the contracting officer announced he was terminating the contract for default, stating his opinion that Lisbon could not complete the job satisfactorily within the contract's time limits.
• Lisbon's president promptly offered to complete the work in accordance with the original contract terms, even at a loss, but the contracting officer refused to discuss the matter further.

Procedural Posture:

• The contracting officer for the SCS terminated Lisbon's contract for default.
• Lisbon submitted a certified claim to the contracting officer, alleging the termination was wrongful and seeking costs under the contract's termination for convenience clause.
• The contracting officer denied Lisbon's claim.
• Lisbon filed a direct access action against the United States in the U.S. Court of Claims, which was later transferred to the U.S. Claims Court (the trial court).
• The United States filed a counterclaim to recover its costs of re-procuring the contract work.
• The Claims Court found in favor of Lisbon, converting the default termination to one for convenience and awarding damages, and dismissed the government's counterclaim.
• Both parties appealed to the U.S. Court of Appeals for the Federal Circuit, which vacated the judgment and remanded for clarification of findings and legal conclusions.
• On remand, the Claims Court again entered judgment in favor of Lisbon.
• The United States (appellant) appealed the second judgment of the Claims Court to the U.S. Court of Appeals for the Federal Circuit.