Section 22-B9814. TERMINATION OF CONTRACTS

 

9814.1The CO may terminate a contract for the convenience of the Hospital or default in whole or in part, if it is determined that the termination is in the best interest of the Hospital.

 

9814.2The CO may effect a no-cost settlement instead of issuing a termination notice.

 

9814.3A termination notice may be amended to accomplish the following:

 

(a)Correct nonsubstantive mistakes in the notice;

 

(b)Add supplemental data or instructions;

 

(c)Rescind or modify the notice if it is determined that items terminated had been shipped or completed before the contractor’s receipt of the notice; or

 

(d)Reinstate the terminated portion in whole or in part with written consent of the contractor.

 

9814.4After issuing a notice of termination for convenience, the CO shall be responsible for negotiating any settlement with the contractor, and shall attempt to settle, in one agreement, all rights and liabilities of parties involved in the terminated contract, except those arising from any portion of the contract still in effect.

 

9814.5If the contractor and the CO cannot agree on a termination settlement or if the contractor fails to submit a settlement proposal within the period required by the termination clause, the CO shall issue a determination of the amount due consistent with the termination clause.

 

9814.6After execution of a settlement agreement, the contractor shall submit a voucher or invoice showing the amount agreed upon, less any portion previously paid.

 

9814.7In the case of construction contracts, before forwarding the final payment voucher, the CO shall ascertain whether there are any outstanding labor violations. If any violations are outstanding, the CO shall determine the amount to be withheld from the final payment.

 

9814.8The Hospital shall not pay interest on the amount due under a settlement agreement or a settlement by determination.

 

9814.9The total amount payable to the contractor under a settlement, before deducting disposal or other credits, exclusive of settlement costs, shall not exceed the contract price less payments otherwise made or to be made under the contract.

 

9814.10Upon termination of a prime contract, the prime contractor and each subcontractor shall be responsible for the prompt settlement with their immediate subcontractors. A subcontractor shall have no contractual rights against the Hospital upon termination of the prime contract.

 

9814.11The failure of a prime contractor to include an appropriate termination clause in any subcontract or the failure of the contractor to exercise the rights of the termination clause shall not affect the Hospital’s right to require the termination of the subcontract and shall not increase the obligation of the Hospital in any way whatsoever.

 

9814.12Under a termination for default, the Hospital shall not be liable for the contractor’s costs on undelivered work and shall be entitled to the repayment of advance or progress payments, if any, applicable to that work.

 

9814.13The default clause shall include a statement that the CO may require the contractor to transfer title and deliver to the Hospital completed supplies. However, the CO shall not use the default clause as authority to acquire any completed supplies unless it has been ascertained that the Hospital does not already have title under some other provision of the contract.

 

9814.14When termination for default appears appropriate, the CO may, if it is in the best interest of the Hospital, notify the contractor in writing of the possibility of the termination. The show cause notice shall call the contractor’s attention to the contractual liabilities if the contract is terminated for default, and request the contractor to show cause why the contract should not be terminated for default.

 

9814.15The show cause notice shall give the contractor seven (7) days after receipt of the notice to present, in writing, any facts bearing on the case. The notice shall be hand-delivered or sent by certified mail, return receipt requested.

 

9814.16The notice may further state that failure of the contractor to present an explanation may be taken as an admission that no valid explanation exists. When appropriate, the notice may invite the contractor to discuss the matter at a conference.

 

9814.17If, after consideration of all facts and circumstances, and after compliance with the provisions of this section, the CO determines that a termination for default is proper, the CO shall issue a notice of termination.

 

9814.18The CO shall furnish a copy to the contractor’s surety, if any, when the notice is furnished to the contractor. The CO shall request the surety to advise the CO if it desires to arrange for completion of the work.

 

9814.19If the CO determines, before issuing the termination notice, that the failure to perform is excusable, the contract shall not be terminated for default. If termination is in the best interest of the Hospital, the CO may terminate the contract for the convenience of the Hospital.

 

9814.20If the CO has not been able to determine, before issuance of the notice of termination, whether the contractor’s failure to perform is excusable, the CO shall make a written decision on that point as soon as practicable after issuance of the notice of termination.

 

9814.21When the CO determines that some action other than a termination for default is in the best interest of the Hospital, the CO may take any one of the following actions:

 

(a)The CO may permit the contractor, the surety, or the guarantor, to continue performance of the contract under a revised delivery schedule;

 

(b)The CO may permit the contractor to continue performance of the contract by means of a subcontract or other business arrangement with an acceptable third party; provided that the rights of the Hospital shall be adequately preserved;

 

(c)If the requirement for the supplies and services in the contract no longer exists, and the contractor is not liable to the Hospital for damages, the CO may execute a no-cost settlement; or

 

(d)The CO may, with the written consent of the contractor, reinstate the terminated contract by amending the notice of termination, after the CO makes a written determination that the supplies or services are still required and reinstatement is in the best interest of the Hospital.

 

9814.22The termination clause of a cost-reimbursement type contract shall require the CO to provide the contractor with at least seven (7) days notice before issuance of a notice of termination for default.

 

9814.23Settlement of a cost-reimbursement contract terminated for default shall be in accordance with the provisions under termination for convenience clause, except as follows:

 

(a)The costs of preparing the contractor’s settlement proposal shall not be allowable; and

 

(b)The contractor shall be reimbursed for all allowable costs, and an appropriate reduction shall be made in the total fee, if any.

 

9814.24When the supplies or services under a terminated contract are still required after termination for default, the CO shall repurchase the same or similar supplies or services against the contractor’s accounts as soon as practicable. The CO shall repurchase similar supplies and services at as reasonable a price as practicable, considering the quality and delivery requirements.

 

9814.25The CO may repurchase a quantity in excess of the quantity terminated for default when the excess quantity is needed. However, the costs of any items in excess of the undelivered quantity terminated for default shall not be charged against the defaulting contractor.

 

9814.26If repurchase is made at a price greater than the price of the supplies or services terminated, the CO shall, after completion and final payment of the repurchase contract, make a written demand on the contractor for the total amount of the excess, giving consideration to any increases or decreases in other costs, such as transportation or discounts.

 

9814.27If the surety offers to complete the contract work, the CO shall accept the offer, unless the CO has reason to believe that the persons or firms proposed by the surety to complete the work are not competent or qualified and the interests of the Hospital would be substantially prejudiced.

 

9814.28If the surety conditions its offer of completion upon the execution by the Hospital of a “takeover” agreement, fixing the surety’s rights to payment from unpaid prior earnings (retained percentage and unpaid progress estimates), the CO may, at any time after the effective date of the termination, enter into a written agreement with the surety.

 

9814.29The takeover agreement shall provide for the surety to complete the work according to all the terms and conditions of the contract and for the Hospital to pay the surety the balance of the contract price, less any setoffs or assessed damages, but not in excess of the surety’s costs and expenses, in the manner provided by the contract subject to the following conditions set forth in this section.

 

9814.30Under a takeover agreement, any unpaid earnings of the defaulting contractor, including retained percentages and progress estimates for work accomplished before termination, shall be subject to debts and assessed damages due the Hospital by the contractor.

 

9814.31The takeover agreement shall not waive or release the Hospital’s right to liquidated damages for delays in completion of the work, except to the extent that they are excusable under the contract.

 

9814.32If the contract proceeds have been assigned to a financing institution, the surety may not be paid from unpaid earnings under a takeover agreement, unless the assignee consents to the payment in writing.

 

9814.33Under a takeover agreement, the surety shall not be paid any amount in excess of its total expenditures necessarily made in completing the work and discharging its liabilities under the payment bond of the defaulting contractor.

 

9814.34The CO shall make payments to the surety to reimburse it for discharging its liabilities under the payment bond of the defaulting contractor only on the basis of one (1) of the following:

 

(a)Mutual agreement between the Hospital, the defaulting contractor, and the surety; or

 

(b)Order of a court of competent jurisdiction.

 

source

Final Rulemaking published at 41 DCR 4508, 4563 (July 8, 1994).