Lisbon Contractors, Inc. v. United States

Lisbon Contractors, Inc. (Lisbon) (defendant) entered into a construction contract with the United States Soil Conservation Service (government) (plaintiff) to construct a concrete bridge and flood control channel. Lisbon subcontracted with Versatile Constructors (Versatile) to supply the concrete. During performance, the government notified Lisbon that it was at risk of default termination, citing delayed performance, Versatile’s poor performance as Lisbon’s concrete subcontractor, and Lisbon’s failure to appoint a full-time construction superintendent. In response, Lisbon appointed an interim full-time superintendent and terminated Versatile as subcontractor. Subsequently, Lisbon met with the government to review Lisbon’s proposed revised work schedule and discuss appointing a permanent full-time superintendent. At the meeting, Lisbon requested certain modifications to the contract specifications that would allow Lisbon to work more efficiently. The government denied Lisbon’s modification request and instead terminated the contract for default, stating, without first conducting a proper evaluation, that it did not believe Lisbon could complete performance by the December 1980 deadline. The government reprocured the contract, which was ultimately completed in December 1981. Lisbon appealed to the Court of Claims, challenging the default termination as unjustified and seeking costs under the termination-for-convenience clause of Lisbon’s contract. The Court of Claims held that the default termination was unjustified and awarded costs. The government appealed to the Federal Circuit, arguing that Lisbon’s past poor performance, failure to appoint a permanent superintendent, and request for contract modifications justified the government’s belief that Lisbon would not be able to timely complete the contract.