Aspic Engineering and Construction Company (Aspic), a local Afghan subcontractor, entered into multiple subcontracts with ECC Centcom Constructors and ECC International (ECC), the prime contractor, to construct buildings and facilities in Afghanistan.  The subcontracts contained terms and conditions “applicable to all U.S. Government subcontracts,” and mandated that Aspic owed ECC the same obligations that ECC owed to the federal government.  The subcontracts also incorporated multiple Federal Acquisition Regulation (FAR) clauses, including FAR 49.2 through 49.6, which govern the recovery of expenses in the event a contractor is terminated for convenience, i.e., required documentation and procedures.

In 2014, ECC was terminated for convenience, so ECC notified Aspic that it also intended to terminate Aspic’s subcontracts for convenience.  Aspic, in turn, submitted multiple settlement proposals to get paid for its work under the subcontracts.  When ECC denied most of Aspic’s proposals, Aspic filed for arbitration, seeking payment for its costs of partially performing under the subcontracts.  Despite Aspic’s failure to comply with the FAR requirements governing payment for partial work in the event of a termination for convenience, the arbitrator awarded Aspic over $1 million.  The arbitrator concluded that Aspic was not required to strictly comply with the FAR requirements based on several factors, including: (i) the subcontracts were drafted to give every advantage to ECC; (ii) it was not reasonable to expect that Afghan subcontractors would be able to conform to the strict and detailed requirements of general contractors on U.S. Federal projects; (iii) it was not reasonable that the parties had the same expectations; and (iv) there was not a true meeting of the minds.

Keep reading this article at: https://www.jdsupra.com/legalnews/ninth-circuit-finds-arbitration-award-25846/

To view the full text of the court’s decision, courtesy of Bloomberg, click here.