Darwin Construction Company, Inc. v. United States

Darwin Construction Company, Inc. (Darwin) (plaintiff) entered into a fixed-price contract with the United States Navy (defendant) to make improvements to a propellant machinery facility. The contract performance deadline was November 15, 1983. Because the facility was in active use, Darwin was allocated two 14-day blocks in which to complete the contract work. However, because of delays in materials and equipment deliveries, and delayed Naval approval of those deliveries, Darwin was only able to complete 65 percent of the contract work by the November 15 deadline. The Navy issued a show-cause notice informing Darwin that it faced default termination. In response, Darwin stated that it was financially and physically ready to complete performance and offered to complete the work in December, estimating it would take an additional four days. The Navy rejected Darwin’s offer and terminated Darwin’s contract for default, citing Darwin’s failure to meet the contract deadline and stating that further access to the facility could not be granted until August 1984. Darwin appealed to the Armed Services Board of Contract Appeals (Board), arguing that the default termination was an abuse of the Navy’s discretion and that it should therefore be converted into a termination for the convenience of the government (convenience termination). Although the Board originally converted the default termination into a convenience termination, upon the government’s motion for reconsideration, the Board upheld the default termination because Darwin failed to prove the Navy issued the default termination in bad faith.