United States Court of Appeals for the Federal Circuit
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`2007-5111, -5131
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`MCDONNELL DOUGLAS CORPORATION,
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` Plaintiff-Appellant,
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`and
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`GENERAL DYNAMICS CORPORATION,
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` Plaintiff-Appellant,
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` Defendant-Appellee.
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`v.
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`UNITED STATES,
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`Charles J. Cooper, Cooper & Kirk, PLLC, of Washington, DC, argued for plaintiff-
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`appellant McDonnell Douglas Corporation. With him on the brief were Michael W. Kirk,
`Howard C. Nielson, Jr. and D. John Sauer. Of counsel on the brief were Caryl A.
`Potter, III, and Elizabeth A. Ferrell, Sonnenschein, Nath & Rosenthal, LLP, of
`Washington, DC; and J. Michael Luttig, The Boeing Company, of Chicago, Illinois.
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`Donald B. Verrilli, Jr., Jenner & Block, LLP, of Washington, DC, argued for
`plaintiff-appellant General Dynamics Corporation. With him on the brief were David A.
`Churchill; and Linda L. Listrom, of Chicago, Illinois.
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`Bryant G. Snee, Deputy Director, Commercial Litigation Branch, Civil Division,
`United States Department of Justice, of Washington, DC, argued for defendant-
`appellee. With him on the brief were Jeanne E. Davidson, Director, and Patricia M.
`McCarthy, Assistant Director. Of counsel was Kirk T. Manhardt, Deputy Director. Of
`counsel on the brief were Wendell A. Kjos and Mark A. Romano, Office of the General
`Counsel, United States Department of the Navy, of Arlington, Virginia.
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`Gregory A. Smith, Cooley Godward Kronish LLP, of Reston, Virginia, for amicus
`curiae National Defense Industrial Association. With him on the brief was David E.
`Fletcher, of Washington, DC. Of counsel on the brief was Ralph C. Nash, Jr., George
`Washington University Law School, of Washington, DC.
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`Appealed from: United States Court of Federal Claims
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`Senior Judge Robert H. Hodges, Jr.
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`United States Court of Appeals for the Federal Circuit
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`2007-5111, -5131
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`MCDONNELL DOUGLAS CORPORATION,
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`Plaintiff-Appellant,
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`and
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`GENERAL DYNAMICS CORPORATION,
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`Plaintiff-Appellant,
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`v.
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`UNITED STATES,
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`Defendant-Appellee.
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`Appeal from United States Court of Federal Claims in 91-CV-1204,
`Senior Judge Robert H. Hodges, Jr.
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`__________________________
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`DECIDED: June 2, 2009
`__________________________
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`Before MICHEL, Chief Judge, MOORE, Circuit Judge, and HUFF,* District Judge.
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`MICHEL, Chief Judge.
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`This case arises from the government’s default termination in 1991 of a contract
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`between the United States Navy (“the government”) and two contractors, McDonnell
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`Douglas Corporation (“MDC”) and General Dynamics Corporation (“GD”) (collectively
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`“contractors”) to develop a carrier-based stealth aircraft, the A-12 Avenger. The
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`
`*
`Honorable Marilyn L. Huff, District Judge, United States District Court for
`the Southern District of California, sitting by designation.
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`

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`contractors challenge the judgment of the Court of Federal Claims in favor of the
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`government. McDonnell Douglas Corp. v. United States, 76 Fed. Cl. 385 (2007)
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`(“McDonnell Douglas XIII”). We heard oral argument on December 3, 2008. Because
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`the overall evidence of record supports a conclusion that the government was justified
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`in terminating the contract for default, we affirm.
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`I.
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`BACKGROUND
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`This American version of Jarndyce and Jarndyce has entered its eighteenth year
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`of litigation. The detailed facts have been repeated many times previously. See, e.g.,
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`McDonnell Douglas XIII; McDonnell Douglas Corp. v. United States, 323 F.3d 1006
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`(Fed. Cir. 2003) (“McDonnell Douglas XII”); McDonnell Douglas Corp. v. United States,
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`50 Fed. Cl. 311 (2001) (“McDonnell Douglas XI”); and McDonnell Douglas Corp. v.
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`United States, 182 F.3d 1319 (Fed. Cir. 1999) (“McDonnell Douglas X”). As we are
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`writing what necessarily will become “McDonnell Douglas XIV,” we will only provide a
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`summary of relevant facts here.
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`A.
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`The A-12 contract
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`In January 1988, the Navy awarded the contractors a fixed-price research and
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`development contract for the A-12 stealth aircraft. The full-scale engineering and
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`development (“FSD”) contract was structured as an incrementally funded, fixed-price
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`incentive contract with a ceiling price of $4,777,330,294. The contract incorporated by
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`reference Federal Acquisition Regulation (FAR) 52.249-9 Default provision (Fixed-Price
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`Research and Development), which provides in relevant part:
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`(a)(1) The Government may . . . by written Notice of Default
`to the Contractor, terminate this contract in whole or in part if
`the Contractor fails to—
`. . .
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` (ii) Prosecute the work so as to endanger performance of
`this contract (but see paragraph (a)(2) of this clause);
`. . .
` (2) The Government’s right to terminate this contract under
`subdivisions (a)(1)(ii) and (iii) of
`this clause may be
`exercised if the Contractor does not cure such failure within
`10 days (or more, if authorized in writing by the Contracting
`Officer) after receipt of the notice from the Contracting
`Officer specifying the failure.
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`48 C.F.R. § 52.249-9 (1984).
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`Under the contract, the contractors were to design, manufacture, and test eight
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`A-12 prototypes according to a specified schedule, with the first aircraft to be delivered
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`in June 1990 (the “first flight” date) and the remaining seven to be delivered monthly
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`through January 1991. The contractors were to conclude their testing of the aircraft by
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`April 1993,
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`the completion
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`time of
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`the Navy’s
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`technical evaluation program
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`(“TCHEVAL”). The contractors would also support the Navy’s evaluation of the aircraft
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`and further provide training support for three years after delivering training equipment to
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`the Navy in June 1993. In addition, the contract gave the Navy the option to purchase
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`four production lots of aircraft. In May 1990, the Navy exercised its option on Lot I for
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`six aircraft to be delivered between June 1991 and May 1992.
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`B.
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`Modification of the A-12 contract
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`From the start, the contractors encountered difficulties in performing the contract,
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`including meeting the contract schedule and keeping the aircraft weight within
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`specifications. McDonnell Douglas XII, 323 F.3d at 1011. Two weeks before the first
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`flight date, the contractors reported to the Navy that the projected first flight date would
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`be July-September 1991, instead of June 1990 as originally agreed, and the remainder
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`of the contract work would be delayed a corresponding twelve to fourteen months.
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`2007-5111, 5131
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`They also predicted that the cost of completing the contract would exceed the ceiling
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`price so substantially that it would be “unacceptable” to the contractors. The contractors
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`asserted that a fundamental problem with the FSD contract was its fixed-price structure
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`and proposed that the contract be modified.
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`At the end of June 1990, the contractors missed the first flight date. The Navy
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`did not terminate the contract. Instead, the contracting officer sent a letter to the
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`contractors in July, expressing “serious concern” regarding the deficient performance
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`under the contract. He warned that the contractors’ failure to meet the first flight date
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`“could jeopardize performance of the entire [contract] effort.” He also asked for the
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`contractors’ plan to meet the rest of the original schedule as well as their proposal for
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`contract revision.
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`As the parties failed to reach an agreement, on August 17, 1990, the Navy
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`unilaterally issued a contract modification, P00046, which revised the prototype aircraft
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`delivery dates but left Lot I and later milestones intact. The delivery schedules are:
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`Original Delivery Date
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`
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`June 1990
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`July 1990
`August 1990
`September 1990
`October 1990
`November 1990
`December 1990
`January 1991
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`June 1991
`August 1991
`October 1991
`December 1991
`March 1992
`May 1992
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`P00046 Modified Delivery Date
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`December 1991
`February 1992
`June 1992
`August 1992
`September 1992
`November 1992
`December 1992
`February 1993
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`Aircraft Number
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`1
`2
`3
`4
`5
`6
`7
`8
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`9
`10
`11
`12
`13
`14
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`Prototype
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`Lot I
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`C.
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`Performance after contract modification
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`After the contract modification, more problems arose concerning the performance
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`of the contract. During the months leading to termination, the contractors’ internal
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`schedules showed that they would not meet the P00046 modified first flight date in
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`December 1991. McDonnell Douglas XIII, 76 Fed. Cl. at 401. Instead, they projected
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`three more months’ delay with the first flight date in March 1992. By December 1990,
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`the contractors’ “confidence in the March 1992 flight date [was further] reduced.” They
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`believed that such a date was achievable “only after significant changes.”
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`At the same time, the contractors continued operations, spending $120-150
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`million of their own money every month. McDonnell Douglas XIII, 76 Fed. Cl. at 427. In
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`November 1990, the contractors submitted a formal request to the Navy to restructure
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`the contract as a cost-reimbursement type contract. McDonnell Douglas X, 182 F.3d at
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`1322.
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`D.
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`The termination
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`The contractors’ continued difficulties in performing the contract led the
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`Department of Defense and the Navy to question the viability of the project. On Friday,
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`December 14, 1990, then-Secretary of Defense Dick Cheney directed the Secretary of
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`the Navy to show cause by January 4, 1991, why the A-12 program should not be
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`terminated.
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`The following Monday, December 17, the Navy issued a cure notice to the
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`contractors, stating that the government considered the contractors’ performance under
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`the contract “unsatisfactory.” In particular, the cure notice stated that the contractors
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`had “failed to fabricate parts sufficient to permit final assembly in time to meet the
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`2007-5111, 5131
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`schedule for delivery,” and had “failed to meet specification requirements.” The letter
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`asserted that “these conditions [were] endangering performance of [the] contract,” and
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`that unless these conditions were cured by January 2, 1991, the government might
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`terminate the contract for default.
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`In the following days, high-level meetings occurred between the responsible
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`government personnel and the contractors. McDonnell Douglas X, 182 F.3d at 1323.
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`During these meetings, the contractors asserted that they could not “get there if [they
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`didn’t] change the contract,” and that it “got to get reformed to a cost type contract or
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`[they could not] do it.” When asked by the government if they could “correct
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`deficiencies to provide an aircraft that meets the requirements,” the contractors replied
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`that “all deficiencies cannot be corrected. . . . Mother [N]ature won’t allow correction of
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`all defects. We’ll do the best we can and the Navy has to decide if that’s good enough.”
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`On January 2, 1991, in responding to the cure notice, the contractors admitted
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`that they would “not meet delivery schedules or certain specifications of the original
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`contract, or the revised FSD delivery schedule.” However, they denied that they were in
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`default because, in their view, the delivery schedules were invalid. They asserted that
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`“the fundamental factual assumptions of the original contract, with respect to schedule
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`and achievability of certain specification requirements, were gravely mistaken,” and
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`therefore, “the schedules and certain other specification requirements, such as weight,
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`were impossible to satisfy.” The contractors concluded that “[i]n these circumstances,
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`there [was] not an enforceable schedule or specifications against which to measure
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`their performance.” They further declared that compliance with the government’s
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`demand to cure by January 2, 1991 was “unachievable.”
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`However, the contractors stated that they were “fully committed to the success of
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`the [A-12] Program.” They again submitted their proposal to restructure the contract to
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`a cost reimbursement contract. In exchange for that restructuring, the contractors
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`would absorb a $1.5 billion fixed loss and would waive their claims for equitable
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`adjustment.
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`On January 7, 1991, Rear Admiral William Morris, the contracting officer at the
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`time, issued a termination letter to the contractors stating that the government was
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`terminating the A-12 contract due to the contractors’ default. A few weeks later, the
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`Navy sent a letter to the contractors demanding the return of approximately $1.35 billion
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`in unliquidated progress payments under the terminated contract. McDonnell Douglas
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`X, 182 F.3d at 1324.
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`A.
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`The first round
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`II.
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`LITIGATION HISTORY
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`In June 1991, the contractors sought relief in the Court of Federal Claims under
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`the Contract Disputes Act, 41 U.S.C. § 609(a), requesting that the court: (1) grant the
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`contractors’ equitable adjustment claims, (2) convert the government’s termination for
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`default into a termination for convenience, (3) deny the government’s demand for return
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`of progress payments, (4) award the contractors costs and a reasonable profit under the
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`contract, (5) award the contractors settlement expenses, and (6) award damages for
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`breach of contract.
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`After several years of litigation, the Court of Federal Claims ruled that the
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`government’s default termination was invalid. McDonnell Douglas Corp. v. United
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`States, 35 Fed. Cl. 358, 368-71 (1996) (“McDonnell Douglas IV”). It found that the
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`contracting officer failed to exercise “reasoned discretion” before the default termination
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`because Secretary Cheney’s actions effectively forced the Navy to terminate the A-12
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`contract for default. Id. at 369-71. Therefore, it vacated the government’s termination
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`for default and converted it into a termination for convenience. Id. at 361. The court
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`ultimately denied the government’s claim for return of $1.35 billion in unliquidated
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`progress payments, and entered judgment of approximately $1.2 billion in favor of the
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`contractors. McDonnell Douglas Corp. v. United States, 40 Fed. Cl. 529, 555-56 (1996)
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`(“McDonnell Douglas IX”).
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`On appeal, we reversed, holding that because the termination for default was
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`related to the contractors’ performance, it was within the discretion of the government.
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`McDonnell Douglas X, 182 F.3d at 1321. We remanded the case for the trial court to
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`determine whether the default termination was justified. Id.
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`B.
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`The second round
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`After a six-week trial on remand, the Court of Federal Claims ruled in favor of the
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`government. McDonnell Douglas XI, 50 Fed. Cl. at 319. The court sustained the
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`default termination based solely on the contractors’ failure to meet the December 1991
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`first flight date. Id. at 315-19. It declined to base its determination of justified default on
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`the contractors’ alleged
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`financial
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`inability
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`to perform
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`the contract, anticipatory
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`repudiation, and failure to comply with weight and other specification requirements. Id.
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`at 319-24. The court also rejected the contractors’ arguments that the unilateral
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`schedule was unreasonable and therefore unenforceable, or, if enforceable then the
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`Navy waived the unilateral schedule and first flight date of December 1991; that the
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`contract was commercially impossible to perform; and that the Navy had to disclose its
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`alleged superior knowledge despite the assertion of the state secrets privilege. Id. at
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`324-26. The court then entered judgment in favor of the government. Id. at 326.
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`On appeal, we affirmed the trial court’s determination that the unilateral schedule
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`imposed by the government was enforceable and not waived, that the Military and State
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`Secrets privilege precluded litigation of the contractors’ “superior knowledge” claim, and
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`that the government’s claim for progress payments was not at issue in the case.
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`McDonnell Douglas XII, 323 F.3d at 1018-24. However, we held that the trial court
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`misapplied the controlling standard in determining whether the default termination was
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`justified. Id. at 1012-14. Therefore, we again vacated and remanded. Id.
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`Specifically, we stated that a default termination did not require “absolute
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`impossibility of performance or a contractor’s complete repudiation or abandonment.”
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`Id. at 1015. On the other hand, the government cannot justify a default termination
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`“based solely on a contractor’s concerns about meeting a contractual schedule
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`milestone or specification requirements.” Id. Instead, the government must establish by
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`a preponderance of the evidence of a “reasonable belief on the part of the contracting
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`officer that there was no reasonable likelihood that the contractor could perform the
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`entire contract effort within the time remaining for contract performance.” Id. at 1016.
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`(citing Lisbon Contractors, Inc. v. United States, 828 F.2d 759, 765 (Fed. Cir. 1987)).
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`C.
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`The third round
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`On remand, the Court of Federal Claims stated as follows:
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`The case turns on whether the Circuit’s remand meant for
`the clauses, “entire contract effort” and “contract completion
`date” to mean exactly what they appear to mean—the
`contractors’ expansive view; or whether the remand permits
`our use of a more compact yardstick—coinciding with the
`Government’s restricted view. The Government did not
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`establish a contract closing date and the contracting officer
`did not conduct a Lisbon analysis prior to termination.
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`McDonnell Douglas XIII, 76 Fed. Cl. at 437 n.92. The court concluded that the
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`government could not “prevail if the law require[d] an enforceable contract completion
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`date at termination,” but went on to state that the government’s “burden of proof [did]
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`not necessarily require the Government to provide a completion date for the entire
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`contract effort.” Id. at 388.
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`Based on its understanding that we “implied in this case that a court may choose
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`a reasonable period of performance to use as a measure of progress on the contract,”
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`id. at 420, the court found that the Navy’s unilateral modification, P00046, was a
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`yardstick that “enable[d] the court to consider the contractors’ progress in light of factors
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`that are probative of their ability and willingness to perform,” id. at 389. Using P00046
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`as the yardstick and considering “all of the relevant facts and testimony,” id. at 421,
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`including mitigating factors for the contractors, the court concluded that the overall
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`evidence of record supported a conclusion that the government was justified in
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`terminating the contract for failure to make progress, id. at 430.
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`In addition, the trial court stated that the judgment in the case mooted the
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`government’s alternative argument that the contractors did not provide adequate
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`assurances to the contracting officer after receiving the notice to cure. Id. at 434.
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`The contractors timely appealed. We have jurisdiction pursuant to 28 U.S.C.
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`§ 1295(a)(3).
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`A.
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`Standard of review
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`III.
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`DISCUSSION
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`Whether the government is justified in terminating a contract for default is a
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`question of law based on factual underpinnings. McDonnell Douglas X, 182 F.3d at
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`1325. We review issues of law de novo, without deference to the trial court. McDonnell
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`Douglas XII, 323 F.3d at 1012 (citation omitted). However, we will not disturb the trial
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`court’s factual findings, such as its evaluation of evidence of default, unless they are
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`clearly erroneous. Id.
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`B.
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`Analysis
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`1.
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`Termination for failure to make progress in the absence of a contract
`completion date
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`In McDonnell Douglas XII, we quoted the language from Lisbon in toto and
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`directed the Court of Federal Claims to determine “the performance required by the
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`contract1 and the contract completion date.” 323 F.3d at 1018 (emphasis added,
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`footnote added). We acknowledge that this specific instruction, if read literally, turns out
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`to be difficult to apply. This is largely due to the unique facts of this case and the
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`disadvantage we faced last time when deciding the case without the benefit of sufficient
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`fact findings from the trial court. See id. at 1014.
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`
`1
`Generally, obligations arising from the exercise of an option are part of a
`new contract only when the option was the principal subject matter of the bargain, i.e.,
`an option contract. Alliant Techsystems, Inc. v. United States, 178 F.3d 1260, 1275
`(Fed. Cir. 1999) (citing 3 Eric Mills Holmes, Corbin on Contracts § 11.1 (1996)). In this
`case, because the option to purchase Lot I production aircraft is not the principal subject
`matter of the original bargain, it is properly considered as part of the original A-12
`contract between the contractors and the government. Thus, “the performance required
`by the contract” includes the design, manufacturing, and testing of the eight prototype
`planes under the FSD contract, the manufacturing and testing of the six Lot I production
`aircraft, and other testing and supporting of the project.
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`The difficulty in strictly applying the Lisbon test lies in the critical fact that P00046
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`revised the prototype aircraft delivery dates but left Lot I delivery dates unchanged. As
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`such, there is an overlap between the modified delivery schedule for the eight prototype
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`aircraft and the original delivery schedule for the Lot I production aircraft. See Delivery
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`Schedules, supra. The government insists that the Lot I schedule remains in effect
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`because that portion of the original contract was not modified by P00046. However,
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`“[t]he A-12 contract was designed as a long-term research and development effort,
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`structured so that each period of performance built upon preceding work.” McDonnell
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`Douglas XIII, 76 Fed. Cl. at 432. Because the eighth test plane would serve as the
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`prototype for the Lot I aircraft, the contractors could not have delivered Lot I aircraft
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`according to the original schedule as that would require delivering the production aircraft
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`prior to the prototype planes. Therefore, we agree with the Court of Federal Claims that
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`the “[a]pplication of the contract in [the] manner [advocated by the government] would
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`be nonsensical.” McDonnell Douglas XIII, 76 Fed. Cl. at 432. It follows that the
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`contract, as modified by P00046, does not provide a definite contract completion date.2
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`Id. at 401.
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`The contractors would have us apply the Lisbon test literally and hold that the
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`absence of a contract completion date per se precludes the government from ever
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`justifiably terminating a contract for failure to make progress. We cannot adopt such a
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`broad categorical rule. The propriety of such a default termination, even though
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`2
`The contractors offered legal principles, such as judicial estoppel and
`waiver, to support this point. We do not believe it is necessary to reach those
`arguments. Whether the contract has a completion date is a question of fact. Common
`sense in this case dictates the conclusion that “[t]he overlapping schedule offered by the
`Government as a basis for assessing default is unreasonable and likely unenforceable.”
`McDonnell Douglas XIII, 76 Fed. Cl. at 432.
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`ultimately a question of law, is a fact-sensitive inquiry. The Lisbon test requires the
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`contracting officer’s reasonable belief that there was no reasonable likelihood of timely
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`completion. Lisbon, 828 F.2d at 765. Therefore, it is inevitable that some case-by-case
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`adjudication is required.
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`To be sure, just as the prior panel did, we reaffirm that the test formulated in
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`Lisbon is a correct standard for determining whether a default termination for failure to
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`make progress is justified. However, this test was announced in view of the specific
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`facts presented in that case, where there was a definite contract completion date.
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`Lisbon, 828 F.2d at 761, 762. It did not address the situation where, as in the present
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`case, the contract does not specify a fixed completion date. See United States v.
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`Alaska S.S. Co., 253 U.S. 113, 116 (1920) (stating that a court “will determine only
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`actual matters in controversy essential to the decision of the particular case before it,”
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`and that it “is not empowered to decide . . . abstract propositions . . . which cannot affect
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`the result as to the thing in issue in the case before it”). As such, the Lisbon standard
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`could not be literally applied in every default termination for failure to make progress
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`case.
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`We are confident that Lisbon does not, as the contractors argue, foreclose a
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`court’s review of a default termination for failure to make progress merely because of an
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`unascertainable contract completion date. This is evident from Lisbon itself, in which
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`the court approved the Claims Court’s citation and interpretation of Universal Fiberglass
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`Corp. v. United States, 537 F.2d 393, 397 (Ct. Cl. 1976).3 Lisbon, 828 F.2d at 765.
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`
`3
`Universal Fiberglass was also cited with approval by the previous two
`panels in deciding the present case. See McDonnell Douglas X, 182 F.3d at 1328;
`McDonnell Douglas XII, 323 F.3d at 1015.
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`Universal Fiberglass involved a supply and service contract for more than 12,000
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`mail delivery trucks. 537 F.2d at 394. The contractor in that case repeatedly failed to
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`meet the installment delivery schedule, even after several extensions of time. Id. at
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`394-95. It closed down almost all of the production lines and laid off most of its labor
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`force. Id. at 395. Meanwhile, a government audit showed that the contractor was
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`insolvent. Id. Time and again, the government asked the contractor to furnish its
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`proposed revised delivery schedule, but to no avail. Id. The government issued a
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`Preliminary Notice of Default and gave the contractor ten days to cure all of its defaults.
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`Id. at 396. After the contractors waived its rights to the full ten-day notice period, the
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`government promptly terminated the contract for failure to make progress. Id.
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`The Court of Claims held that the contract was properly terminated for failure to
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`make progress. Id. The court found that in the absence of a delivery schedule, i.e., the
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`contract completion date, the “cure notice” served the purpose of advising the contractor
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`when the time for default has been reached. Id. at 398. The court reasoned:
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`The contractor had already been asked to submit a new
`delivery schedule and had not done so. Nor had the
`contracting officer learned, from the contractor or any other
`source, any information to lead him to believe that deliveries
`would or could ever be resumed. In such circumstances, a
`unilateral delivery schedule prescribed by him would have
`been an exercise in futility, except for forensic purposes,
`should we be so foolish as to give the absence of such a
`schedule any legal significance or weight.
`
`
`Id.
`
`We realize that the facts in Universal Fiberglass are not exactly the same as in
`
`the present case. First, the difficulties in designing and manufacturing stealth aircraft
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`are incomparable to those in making small three-wheeled mail delivery trucks. More
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`2007-5111, 5131
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`14
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`

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`importantly, as the contractors correctly point out, in Universal Fiberglass, the contractor
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`“was making no progress at all, had never manufactured a vehicle under the new
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`specifications it had agreed to, did not have the necessary parts and could not obtain
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`them and had allowed its labor force to wither away.” Id. at 398. In contrast, in the
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`present case, “[d]espite delays, the contractors continued operations. They were
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`spending $120 to $150 million of their own money every month. They were committed
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`to performing the A-12 contract until the date of termination.” McDonnell Douglas XIII,
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`76 Fed. Cl. at 427.
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`However, the contractors’ commitment to performing the contract was not without
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`conditions. Starting from as early as June 1990, the contractors had asserted that “the
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`A-12 contractual schedule [was] not achievable and need[ed] to be changed.” They
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`also predicted that the cost of completing the contract would exceed the ceiling price so
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`substantially that it would be “unacceptable” to the contractors. Insisting that the A-12
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`project could not “be accomplished under a fixed price type contract without [solving]
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`the financial, schedule and specification problems,” the contractors proposed that the
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`contract be modified. The contractors maintained this position throughout their
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`performance of the A-12 contract.
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`After missing the original first flight date, “[t]he contractors were working to an
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`aggressive schedule, but they would not sign up for one.” McDonnell Douglas XIII, 76
`
`Fed. Cl. at 399. Because the contractors rejected the government’s proposal of a
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`bilateral modification of the contract, the government imposed the unilateral modification
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`of the delivery schedule for the prototype airplanes, P00046, “as a first step in achieving
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`the overall delivery schedule.” McDonnell Douglas XIII, 76 Fed. Cl. at 400.
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`2007-5111, 5131
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`15
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`

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`P00046 extended the first flight date from June 1990 to December 1991. The
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`contractors’ projected delivery date, however, further slipped away. “Six months prior to
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`termination, the contractors projected a twelve to fourteen-month delay in first flight
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`[June – August 1991]. By termination, the contractors’ expectations extended first flight
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`to March 1992.” McDonnell Douglas XIII, 76 Fed. Cl. at 422. In fact, by December
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`1990, the contractors’ confidence in even the March 1992 flight date was reduced.
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`They believed that such a date was achievable “only after significant changes.” As the
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`trial court found, “Navy officials . . . could not predict when the contractors would deliver
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`first flight.” McDonnell Douglas XIII, 76 Fed. Cl. at 401.
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`As the contractors themselves emphasize, “one cannot test an aircraft before it
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`has been built, nor build a production airplane before developing its prototype.”
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`Therefore, without the timely delivery of the prototype airplanes, there would be no
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`basis for the government to prescribe a new delivery schedule for Lot I aircraft. In this
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`sense, similar to the Court of Claim’s opinion in Universal Fiberglass, we believe
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`requiring the contracting officer to artificially reset the contract completion date would
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`have been “supererogatory,” “except for forensic purposes.” See Universal Fiberglass,
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`210 Ct. Cl. at 217. Therefore, we agree with the trial court that this case is similar to
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`Universal Fiberglass in that
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`a schedule is not necessary because the cure notice
`supplants the schedule and serves a similar function. The
`cure notice lets a contractor know that even if performance
`or delivery is not yet due, the contracting officer believes the
`contractor may not be making sufficient progress
`to
`complete the contract on time. The burden is then on the
`contractor to advise the Government how it will complete the
`project on time, according to contract requirements.
`
`
`Id. at 419.
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`2007-5111, 5131
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`16
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`

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`One could analogize the per se rule advocated by the contractors to an injunction
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`against the government. In granting or denying an injunction, a court follows traditional
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`equitable principles and “balances the conveniences of the parties and possible injuries
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`to them” to arrive at a “nice adjustment and reconciliation” between the competing
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`claims. Weinberger v. Romero-Barcelo, 456 U.S. 305, 312 (1982). When a
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`government contract is terminated, there are two interests at issue—the contractor’s
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`interest in holding the government to its obligation to carry out the contract, and the
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`government’s interest in not wasting taxpayer dollars. The contractors in this case,
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`however, would have us enjoin the government from ever terminating a contract for
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`failure to make progress based on a single factor—the contract lacks a set completion
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`date. We reject such a per se rule because it serves only the contractors’ interest.
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`Instead, we favor an ad hoc, f