CBCA 5964

GRANTED: March 6, 2023 CBCA 5964 HUGHES GROUP LLC, Appellant, v. DEPARTMENT OF VETERANS AFFAIRS, Respondent. Robert A. Klimek, Jr. of Klimek & Casale, P.C., Upper Marlboro, MD; and Edward G. Bentley, Washington, DC, counsel for Appellant. Harold W. Askins, III, Office of General Counsel, Department of Veterans Affairs, Charleston, SC, counsel for Respondent. Before Board Judges SHERIDAN, SULLIVAN, and O’ROURKE. O’ROURKE, Board Judge. Hughes Group LLC (Hughes or contractor) appealed the decision of the Department of Veterans Affairs (VA or agency) to terminate Hughes’ janitorial services contract for cause based on Hughes’ failure to cure persistent performance deficiencies. Instead of terminating Hughes’ contract in the weeks following the cure notice, the agency breached the contract by failing to pay Hughes for months, while Hughes continued to perform. Ten days after paying Hughes’ overdue invoices in full, the agency sought to terminate Hughes’ contract based on deficient work. The notice, styled as a termination for cause, directed Hughes to continue performing until the contract nearly expired. Because we find that the agency’s actions waived the right to terminate without first issuing a new cure notice, rendered the purported termination for cause ineffective, and were arbitrary and capricious, CBCA 5964 2 we grant the appeal and convert the termination to one for the convenience of the Government. Findings of Fact Solicitation and Award In 2015, the VA solicited offers from service-disabled, veteran-owned small businesses to furnish “all labor in order to provide total housekeeping cleaning services” at multiple medical facilities in San Antonio, Texas. This was a performance-based contract that required scheduled and “as needed” cleaning in these facilities in order to “maintain a satisfactory facility condition and present a clean, neat, and professional appearance.” The contract required services at nine facilities, which together comprised the VA South Texas Healthcare System. The statement of work (SOW) spanned twenty-three pages and contained detailed requirements for various items, such as the minimum hours of coverage for contractor shifts, staff qualifications, cleaning requirements, training, building security, quality control, safety, government-furnished equipment, supplies, a cleaning schedule, and deliverables. Section 12 of the contract, titled “Quality Control Monitoring,” required the contracting officer’s representative (COR) to perform regular inspections of the contractor’s performance to ensure compliance with the SOW. The COR was also required to produce weekly and monthly reports to document the results of those inspections. The contract provided for a one percent decrease in monthly billing by facility when the VA received five or more complaints about Hughes’ performance during the weekly reporting period. The contract also contained Federal Acquisition Regulation (FAR) clause 52.212-4, Contract Terms and Conditions – Commercial Items (Dec 2014), which included provisions for terminating the contract for convenience and for cause. Before submitting offers, interested firms, including appellant, participated in a partial site visit that was limited in scope. Potential offerors then submitted questions about the total number of patient rooms, the tenant population, the number of restroom fixtures (or total square footage of the restrooms), the areas requiring aseptic cleaning, and the level of staffing under the current contract. The VA did not provide definitive answers to these questions but explained that the patient and tenant numbers were increasing to meet the needs of veterans and that, as a performance-based contract, the agency did not dictate staffing. The agency directed interested firms to refer to their notes from the site visit in preparing their offers.