The American Samoa Government wrongfully terminated for default the Whitehorn Construction Incorporation (WCI) contract that was awarded for the Airport Road Project. This was the ruling by the administrative Law Judge (ALJ) Toetagata Albert Mailo, issued earlier this week.

WCI last year filed an appeal with the ALJ when ASG moved to terminate their contract, naming ASG and Chief Procurement Officer Tiaotalaga John Kruse as defendants.

Representing ASG in this matter was Assistant Attorney General Vincent Kruse while Sharron Rancourt represented WCI.

According to the April 21, 2014 ruling, this matter was before the Tribunal on Apr. 3, 2014 in a procurement appeal where the ALJ ordered the parties to submit proposed findings of fact and conclusions of law to the court.

The order stated that the main issue before the Tribunal is whether ASG was correct and justified in terminating the contract for default; and in his ruling, the ALJ set aside the termination for default and stated the contract be terminated for convenience.

The ALJ ruling, if not appealed by the government, opens the way for WCI to begin to negotiate for monies it says it is owed for work done on the airport contract before the termination.

“Termination for convenience” is a standard clause in government contacts, according to businessdictionary.com, which “which gives the government the right to unilaterally terminate the contract at any time with or without giving any reason.” Under this clause, “the contractor is generally entitled to a negotiated settlement for an equitable recovery of costs and losses incurred.”

On the other hand, “termination for default” is defined as a “standard contract clause, which gives a customer the right to unilaterally terminate the contractor if the contractor fails to perform according to the specified terms.

“The contractor is generally not entitled to any payment for the unfinished part of the contract and, instead, may be liable for (1) repayment of monies advanced, (2) liquidated and other damages, and (3) excess cost incurred by the customer in completing the contract under a new contractor.”

WCI would also have found itself barred from bidding or participating in federally funded projects, for a numbers of years, if its contract was terminated for default, according to the government in its letter to WCI in February of this year.

ANALYSIS & DECISION

The ALJ ruled that based upon the incorporated findings of fact and conclusion of law presented by WCI to the Tribunal, they were required by the contract to have a valid payment and performance bond.

“Whitehorn procured a payment and performance bond that they believed to be valid. It was not, WCI was not at fault, neither was AS; the contract was executed and this was a mutual mistake between the parties,” the ruling states.

It further notes that Whitehorn carried out the work “satisfactorily” to ASG, and ASG through its Public Works Director testified she had no problem with the work WCI performed.

The ALJ ruled that a determination for default is not justified in this case and it was set aside. “This tribunal finds and concludes that the contract is terminated for convenience.”

In a statement issued by Whitehorn, the company said this ruling is a victory for WCI, a construction company committed to serving the territory of American Samoa and this ruling “for convenience” is not punitive in nature as it allows Whitehorn to continue to bid on construction projects in American Samoa.

WCI President Loran Whitehorn, speaking from his corporate office in California, stated, “WCI is pleased with the decision of the ALJ and supports his ruling. Whitehorn looks forward to actively bidding more projects in American Samoa and providing jobs for the local economy.”

In July of 2013, ASG terminated Whitehorn’s contract for default after ASG learned that the payment and performance bonds Whitehorn submitted were fake or bogus.

“Whitehorn has contended from the outset of this dispute that Whitehorn fell victim to an elaborate bonding scheme perpetrated by persons representing themselves as active representatives of a respected surety company.”

According to the statement from WCI, sources reveal that more than a dozen contractors nationwide, including Whitehorn, were victims of this same bonding scheme.

Efforts to obtain comments from ASG were unsuccessful and emails sent out were not answered as of press time. It is unknown if ASG will appeal the ALJ’s decision.