(Editor’s Note.  The following helps clarify what precontract costs may and may not be recoverable under a termination for convenience.)

A contractor spent considerable funds on estimating and negotiating a construction contract.  When it received notice of winning the contract, the contractor immediately incurred project management costs to set up the work to meet the schedule.  The award was made seven days later and was terminated for convenience less than three weeks later after 80 percent of the project management effort had been completed.  In its termination proposals it sought to recover 80 percent of what it had included in its price for project management, the pre-proposal costs and 15 percent profit on the amount and the agency rejected all proposed costs on the grounds they were incurred before the contract award.  The Appeals Board ruled the contractor was entitled to the project management costs because it had incurred the costs in order to meet the contract schedule and is not precluded from recovering these start-up costs on the grounds they preceded formal contract award.  However, the Board rejected the costs incurred prior to submitting its proposal stating such costs are not recoverable as part of a T of C claim (Barish Co., PSBCA, No. 4481).

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