## Facts

- The Defense Logistics Agency awarded DCX, Inc. a contract to supply light sets for medical tents.
- The contract required first-article testing and submission of a First Article Test Report by June 30, 1988, with production deliveries to begin July 18, 1988.
- The contract provided that failure to timely deliver the First Article Test Report would be treated as a failure to make delivery under the contract’s default clause.
- DCX subcontracted first-article testing to Ball Brothers Aerospace Systems because DCX lacked in-house testing facilities.
- Ball began testing later than anticipated; DCX’s subcontract arrangement lacked a firm performance deadline and DCX had no alternative testing plan.
- DCX informed the government that the report would be late and attributed the delay to Defense Priorities and Allocations System (DPAS) priority requirements that allegedly displaced Ball’s work for higher-priority orders.
- The contracting officer notified DCX it was in default but agreed to forbear termination until July 12, 1988.
- DCX failed to submit the report by July 12 and provided no additional explanation for the continued delay.
- The government terminated the contract for default; DCX appealed to the Armed Services Board of Contract Appeals (ASBCA), which upheld the default termination.

## Issues

1. Whether DCX proved an excusable delay defense by showing that DPAS priority requirements caused the late submission of the First Article Test Report.
2. Whether the contracting officer’s decision to terminate for default (rather than for convenience) was arbitrary, capricious, or an abuse of discretion warranting conversion to a termination for convenience.

## Decision

- The Federal Circuit affirmed the ASBCA’s decision sustaining the default termination.
- The court held DCX did not carry its burden to prove DPAS caused the delay so as to excuse late performance.
- The court held the default termination decision had a reasonable basis and was not arbitrary or capricious.

## Legal Principles

- When a contractor misses a contractual delivery requirement, default is established unless the contractor proves the failure resulted from causes beyond its control and without its fault or negligence.
- The contractor bears the burden to prove an asserted excusable delay defense, including causation between the asserted external cause and the missed deadline.
- Prime contractors generally remain responsible for subcontractor performance and for reasonable contracting and contingency planning.
- A default termination will not be overturned as arbitrary or capricious where the contractor is in unexcused default and the contracting officer’s decision has a reasonable basis; conversion to termination for convenience requires more than disagreement with the exercise of discretion.

## Conclusion

The Federal Circuit upheld the government’s termination for default because DCX failed to demonstrate that DPAS priority rules caused an excusable delay and failed to show that the contracting officer lacked a reasonable basis or abused discretion in terminating the contract for default after DCX missed both the original and extended report deadlines.


DCX, Inc. v. Perry, 79 F.3d 132 (Fed. Cir. 1996)