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Profit Recoverable in Commercial Item Termination

January 5, 2015

In SWR, Inc. (Dec. 15), the ASBCA ruled that the termination for convenience of a commercial item contract, before any services had been ordered, still entitled the contractor to "fair compensation" under a more expansive interpretation of "reasonable charges" than the board had previously endorsed, including start-up costs, travel expenses, wages, forfeited deposits, lease mitigation charges, settlement expenses, attorney fees, and other operating expenses. With one dissent, the board also held that contractors are entitled to a reasonable profit on all termination-related charges, despite the lack of express allowance for profit in the standard Commercial Items terms.

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J. Chris Haile
Partner – Washington, D.C.
Phone: +1.202.624.2898
Skye Mathieson
Partner – Washington, D.C.
Phone: +1.202.624.2606