Introduction
Abuse of discretion may be one of the most misunderstood claims in federal government contracts law. Contractors and their counsel often treat it as a softened version of bad faith, importing motive requirements and heightened burdens that the doctrine does not actually demand. This article explains how that conflation arose, why it matters now, and what abuse of discretion truly requires: a record-based inquiry into whether the contracting officer’s decision can be justified by the facts she had at the time. It is written for contractors and their counsel who need a practical, pleading-level understanding of how to assert abuse of discretion without alleging improper motive.
Key Takeaways for Contractors and Counsel
- Abuse of discretion in federal government contracts is a record-based reasoning defect, not a motive-based accusation; the question is whether the decision can be justified by the facts the contracting officer had at the time.
- Bad faith and abuse of discretion are distinct claims with different burdens: bad faith requires proof of improper motive and clear and convincing evidence, while abuse of discretion is governed by an ordinary preponderance standard.
- The long-standing conflation of the two stems from historical case law pairings such as Heyer, Keco, and Kalvar, the four-factor arbitrary-and-capricious framework, the phrase “clear abuse of discretion,” and a presumption of governmental good faith borrowed from other contexts.
- In practice, courts often resolve abuse-of-discretion questions by asking whether the decision had a rational, contract-related basis in the contemporaneous record, without analyzing subjective motive.
- Contractors and their counsel should plead abuse of discretion by identifying the challenged decision, anchoring the claim in the contemporaneous record, and isolating specific reasoning defects rather than alleging improper motive
Making a bad decision does not make the contracting officer a bad person.
Some of the strongest government contract claims never get filed or are made more difficult to prove—not because they lack merit, but because abuse of discretion is too often confused with bad faith. They are not the same. Bad faith requires proof of improper motive. See Am-Pro Protective Agency, Inc. v. United States, 281 F.3d 1234, 1239–40 (Fed. Cir. 2002). Abuse of discretion asks whether the contracting officer’s decision can be justified by the record she had; motive is not an element. In our experience, counsel who treat a record-based reasoning mistake as corrupt motive either make the claim they have more difficult to prove or decline to make it at all, believing they cannot meet a burden that was never theirs to carry.
The claim arises not from ordinary contract administration, but where the contract or procurement framework commits a performance judgment to the contracting officer. Those judgments run from comparatively constrained decisions—whether to accept or reject a required submittal, shop drawing, test result, or deliverable; whether a contractor’s cure-notice or show-cause response is adequate; whether to approve a proposed waiver, deviation, substitution, or corrective action; and the percentage of completion supporting a progress payment—to increasingly open-ended decisions concerning the manner or sequence of work within the contract’s scope, requests for time relief, proposed changes and bilateral modifications, settlement of REAs or claims, the issuance of cure or show-cause notices, termination for default or conversion of a default termination to one for convenience, exercise of an option, termination for convenience, and, at the far end, declining to exercise an option. The analysis below runs across that range, though the vocabulary the courts use differs from decision to decision, and a record-based abuse-of-discretion theory is not equally available at every point on it.
The distinction has not been this consequential in years. The wave of contract terminations beginning in 2025 has put bad faith and abuse of discretion before the Court of Federal Claims in volume, with the government moving to dismiss on the ground that neither has been adequately pleaded. Whether the two claims share elements and a burden is not merely a question of drafting preference. It determines what a contractor must plead to survive dismissal.
The mischaracterization of abuse of discretion has a specific origin. Kalvar Corp. v. United States, 543 F.2d 1298 (Ct. Cl. 1976), is the case most often cited for the pairing, and the one most practitioners would name if asked where the conflation began. It is not actually the earliest source. That distinction belongs to cases decades older, but a footnote in Kalvar paired abuse of discretion with bad faith without drawing the distinction and that footnote did more than any single citation to fix the pairing in practitioners’ minds. Over time, the claim absorbed bad faith burden language and appellate deference habits even though neither one reflects what abuse of discretion tests.
At bottom, abuse of discretion asks one question: can the decision be justified by the facts before the decision-maker at the time? Motive does not matter. Yet because the claim so often travels with bad faith, many assume it requires proof of improper motive.This is not a survey of abuse of discretion decisions. It is an account of how the mischaracterization was built, why it has lasted, and what it has cost contractors who accepted it as received wisdom. The discussion turns on four pillars: Kalvar and its footnote, the four-factor test that includes subjective bad faith as an example of abuse of discretion, the phrase “clear abuse of discretion,” and the borrowed presumption of governmental good faith. The practical point is straightforward: plead abuse of discretion as a record-based defect in reasoning, not as a softened version of bad faith.
How Abuse of Discretion Became Maligned
Abuse of discretion did not acquire its reputational weight because any court held that it shares bad faith’s elements or burden. No court has expressly done so. The weight came through proximity: bad faith and abuse of discretion named together, cited together, and repeated together until association began to look like equivalence.
The gap is not newly noticed. Writing in the Maryland Law Review in 1997, Frederick W. Claybrook, Jr., observed that the abuse of discretion exception was poorly defined and that few decisions addressed how it differed from bad faith. He identified the problem in a footnote and moved on to a different argument, that federal contracts law should measure the government’s termination discretion against the objective good-faith standard of the common law rather than against subjective bad faith. What has gone unexamined in the nearly thirty years since is the narrower and more immediately useful point: abuse of discretion is already a distinct claim, already governed by an ordinary burden, and available now to counsel who plead it as such.
Kalvar and its footnote
The conflation did not begin with the Kalvar decision. The court in Keco Industries, Inc. v. United States made it explicit a decade earlier, equating “wholly unreasonable action” with “conduct motivated by subjective bad faith,” 492 F.2d 1200, 1204 (Ct. Cl. 1974), and tracing that equation to Heyer Products Co. v. United States, 140 F. Supp. 409 (Ct. Cl. 1956). Kalvar Corp. v. United States then admitted to the conflation rather than correcting it. The court accepted the plaintiff’s “equation” of bad faith and abuse of discretion “for purposes of this decision,” and noted that “many of our prior decisions seem implicitly to accept the equivalence of bad faith, abuse of discretion, and gross error.” 543 F.2d 1298, 1301 & n.2 (Ct. Cl. 1976). That footnote did not announce a rule. It acknowledged a habit. But acknowledgment without correction was enough: the footnote became a citation, then a string cite, then doctrine by repetition.
The immediate consequence was burden. Bad faith, unlike abuse of discretion, must be proved by clear and convincing, rather than a preponderance of, evidence. See Am-Pro Protective Agency, 281 F.3d at 1239–40. When the claims appear together, as Kalvar encouraged, bad faith’s burden travels.
Bad faith as a factor
The equation hardened into structure through the four-factor test. In Krygoski Construction Co. v. United States, the Federal Circuit explained that a contracting officer may not terminate for convenience “simply to acquire a better bargain from another source,” and that a termination tainted by “bad faith or an abuse of contracting discretion” is a breach. 94 F.3d 1537, 1541 (Fed. Cir. 1996). The disjunctive is doing real work: “bad faith or an abuse of contracting discretion” treats the two as alternative routes to breach, not as one claim with a shared burden. But because the pair is almost always recited together, the “or” has carried less weight in practice than it should.
The Armed Services Board applied the same structure. In ADT Construction Group, Inc., the Board listed four factors: subjective bad faith, a reasonable contract-related basis, the discretion vested in the official, and violation of a relevant statute or regulation. ASBCA No. 55358, 13-1 BCA ¶ 35,307 (2013) (citing Empire Energy Management Systems, Inc., ASBCA No. 46741, 03-1 BCA ¶ 32,079 (2002)). The Board then cleared the bad faith factor first, noting that “appellant makes no assertion, and there is no evidence, that the contracting officer acted out of a personal sense of bad faith toward ADT.” Id.
That four-factor test traces through Empire Energy to McDonnell Douglas Corp. v. United States, 182 F.3d 1319, 1326 (Fed. Cir. 1999); United States Fidelity & Guaranty Co. v. United States, 676 F.2d 622, 628–30 (Ct. Cl. 1982); and Keco Industries. USF&G states the point most plainly, listing subjective bad faith first among four factors for determining whether official conduct is arbitrary and capricious. 676 F.2d at 630. The chain runs from the Court of Claims to the Federal Circuit and the Armed Services Board. Read carefully, though, the test refutes the equation it is blamed for. The four factors were framed as alternative indicia of arbitrary and capricious conduct, not as elements to be proved cumulatively; if subjective bad faith is one sufficient route among four, it cannot also be a required one. The real difficulty is provenance rather than ordering. Keco and Heyer were bid-protest cases about the award of a contract, and the four factors were developed to review an agency’s procurement decision. Transplanted into contract administration, a test built for administrative review became a checklist for a contract claim.
Not every tribunal followed. A federal district court in Vibra-Tech Engineers, Inc. v. United States, 567 F. Supp. 484 (D. Colo. 1983,) applied an abuse of discretion standard without finding bad faith, and the Armed Services Board in Viktoria Transport GmbH & Co., KG, ASBCA No. 33591, 88-3 BCA ¶ 20,921 (1988), defined the abuse of discretion standard separately rather than as an aspect of motive. These are scattered decisions rather than a competing line, and neither is binding on the Federal Circuit. But they show the separation is not a novelty invented for this article. It was available all along and simply went unused.
“Clear abuse of discretion”
The word “clear” has done outsized damage to the claim’s reputation. It sounds like “clear and convincing,” and so it quietly borrows bad faith’s heightened standard of proof. Yet no court appears to have held, as a deliberate matter, that abuse of discretion requires a special “clear” showing beyond that established by a preponderance of the evidence. The word survives by citation habit, not by reasoned holding. The government’s better answer is that “clear” describes the standard of review rather than the standard of proof—that rational-basis review is deferential precisely because the contract assigned the judgment to the contracting officer. That answer is right as far as it goes, and it is worth conceding. Deferential review and heightened proof are nonetheless different things, and the case law slides between them without noticing.
The modern Federal Circuit recites the rule as settled: “[i]n the absence of bad faith or clear abuse of discretion, the contracting officer’s election to terminate for the government’s convenience is conclusive.” T & M Distributors, Inc. v. United States, 185 F.3d 1279, 1283 (Fed. Cir. 1999). The phrase traces to Krygoski, 94 F.3d at 1543, quoting Salsbury Industries, which quoted John Reiner & Co. v. United States, 325 F.2d 438, 442 (Ct. Cl. 1963). A 2025 Federal Circuit panel confirmed that the same chain remains operative. 27-35 Jackson Ave LLC v. United States, 127 F.4th 1314, 1320 n.3 (Fed. Cir. 2025). The “clear” qualifier has thus propagated for decades without a reasoned holding that abuse of discretion requires more than ordinary proof.
What the case law shows, when courts resolve the abuse of discretion question on the merits, is that factor two—whether the decision had a reasonable, contract-related basis—is often the whole inquiry. In TigerSwan, Inc. v. United States, 118 Fed. Cl. 447, 454-55 (2014), the Court of Federal Claims articulated the operative standard as whether the decision was “rationally based on the objective evidence that was available to the CO at the time.” The court found no abuse of discretion because the decision had a rational evidentiary basis and stopped there; it did not separately analyze the breadth of delegated discretion or any statutory violation. The Federal Circuit applied the same approach in Securiforce International America, LLC v. United States, 879 F.3d 1354 (Fed. Cir. 2018). Securiforce had expressly disclaimed bad faith, so the court addressed only abuse of discretion. The court’s entire analysis consisted of a single sentence: “It was entirely reasonable—and no abuse of discretion—for the government to decide that this approach was in its best interests.” Id. at 1365. No discussion of subjective motive. No analysis of the breadth of discretion delegated to the contracting officer. No inquiry into statutory or regulatory compliance. The decision stood or fell on objective reasonableness alone. Securiforce should be read with its posture in mind: the government won, and a court satisfied that a decision was reasonable has less occasion to canvass the remaining factors than one that is not. The analytical point holds either way; nothing in the court’s reasoning turned on motive.
Breadth of discretion is not a burden of proof
A related habit treats broad contracting officer discretion as if it raises the burden of proving abuse. But breadth of discretion and standard of proof are different questions, and no decision has used broad discretion as an excuse to demand a heightened standard of proof.
Nor would you expect a court to do so. The difficulty in proving abuse of discretion as it relates to a decision for which the contracting officer has significant discretion has nothing to do with the standard of proof and everything to do with breadth of discretion. There are significant differences in the ease with which one can prove abuse of discretion between (a) the rejection of a submittal, (b) the determination of the percentage of completion for purposes of progress payments, and (c) whether to exercise an option. That increasing difficulty has nothing to do with the standard of proof and everything to do with the increasingly narrow window available to support an abuse of discretion claim.
At the far end of that range the window narrows to a slit. The Government owes no reason for declining to exercise an option, so silence alone is not a defect—there is nothing the contracting officer failed to say. But narrow is not closed. A reason voluntarily given remains testable: a contracting officer who declines on a stated ground the record contradicts has made a decision resting on a false premise, and that can be abuse of discretion without regard to whether improper motive can be proved. Nor is the inquiry confined to what was articulated. The question is whether a reasonable, contract-related basis existed in the contemporaneous record. Where the record shows that the Government valued the contractor’s performance, continued to need the work, and had no better source, an inference that no such basis existed may be available—though the Government may still identify a different contemporaneous justification. The contractor’s difficulty is evidentiary rather than conceptual: it must prove the absence of a justification the Government was never required to supply. That is why the motive-based claim is often the more practicable theory at this end of the range. The difficulty belongs to proof, not to the existence of the claim. What does belong to bad faith is the separate case in which the stated reason was not the actual reason: pretext is evidence of purpose, and purpose is bad faith’s subject, not this claim’s.
The irrelevant presumption of good faith
One more borrowed feature remains: the presumption that the government, as a contracting party, is acting in good faith. Whatever force that presumption carries in a claim alleging bad faith, it has no role in a claim alleging abuse of discretion—not because the presumption is weak, but because it is not responsive. It answers a question this claim does not ask.
Abuse of discretion asks whether the decision had a rational basis within the limits of the contracting officer’s authority. That question is answered by the record: what the contracting officer had before her, what she concluded from it, and whether the conclusion follows. Her state of mind is not an input. A presumption about her state of mind therefore cannot supply an answer, and neither can proof of it. Good faith—whether presumed or established—leaves the question exactly where it stood.
A contracting officer who acted in perfect good faith can still have made a decision that cannot be justified by the record. The government’s good faith, like its improper motive, is not relevant to that inquiry.
The government’s sovereign-status defense, the decades of precedent, the institutional efficiency concern—none of it matters if good faith is not a responsive answer to the question presented: is there a rational basis in the record for the decision being challenged? Good faith is irrelevant to that inquiry in the same way bad faith is irrelevant to it.
What Abuse of Discretion Actually Requires
Stated correctly and completely, abuse of discretion asks whether a decision can be justified by the facts the decision-maker had. Abuse of discretion is a reasoning defect, visible on the face of the record, with inquiry into motive neither required nor relevant. No heightened standard of proof attaches; ordinary proof suffices. Bad faith is different: it requires proof of improper motive. Am-Pro Protective Agency, 281 F.3d at 1239–40. The injury need not be the motive’s target, but a presumption of good faith applies, and clear and convincing, “well-nigh irrefragable” evidence is required to overcome it. The phrase has drawn criticism for decades. Commentators argued as early as 1990 that “well-nigh irrefragable” meant nothing more than clear and convincing evidence, and Claybrook complained in 1997 that the case law had never said so. Am-Pro finally said so in 2002. The archaic formulation now has a defined content, and counsel who are deterred by the phrasing are being deterred by a ghost the Federal Circuit already laid to rest.
The distinction is simple. A sincere decision can still be irrational; that is not bad faith, but it can be abuse of discretion.
A third claim is often folded in with these two and should not be. Breach of the implied duty of good faith and fair dealing asks whether a party’s conduct deprived the other of the reasonably expected fruits of the bargain. It is a contract claim with contract elements, and it does not carry bad faith’s heightened burden. It also asks a different question from abuse of discretion: the implied duty looks to the parties’ expectations at formation, while abuse of discretion looks to the record before the decision-maker at the time of the decision. A contracting officer can honor every expectation the contract created and still make a decision the record cannot support. Three claims, three questions, three burdens—and the habit of reciting them together is what obscures all three.
The proof structure follows from the definition. To establish abuse of discretion, the contractor must identify the decision, anchor its challenge in the contemporaneous record, and isolate the specific defect — the missing reason, the false premise, the ignored constraint, or the unexplained leap from evidence to conclusion. The question throughout is whether the decision can be justified by the facts before the decision-maker at the time; what the decision-maker believed or intended is beside the point.
That structure also explains why courts sometimes resolve the abuse of discretion question without reaching subjective bad faith, discretion breadth, or statutory compliance. When the record either clearly supports or clearly cannot support the decision, the objective inquiry ends the analysis. Securiforce, 879 F.3d at 1365, illustrates the point from the government’s side: the Federal Circuit found no abuse of discretion because the decision was objectively reasonable, without any further analysis. The same logic applies when the record cannot support the decision: a contractor who demonstrates that the stated justification is factually false, internally contradictory, or unrelated to any cognizable government interest has established abuse of discretion on objective grounds, without proving motive.
The reasonableness test has a long pedigree. In Ripley v. United States, the Supreme Court held that the government’s “judgment should be exercised not capriciously or fraudulently, but reasonably, and with due regard to the rights of both the contracting parties,” 223 U.S. 695, 701-02 (1912), echoing Kihlberg v. United States, 97 U.S. 398, 401-02 (1878). Later cases state the same rule: “[a] party vested with contractual discretion must exercise his discretion reasonably and may not do so arbitrarily or capriciously.” Pacific Far East Line, Inc. v. United States, 394 F.2d 990, 998 (Ct. Cl. 1968). This is an old and ordinary test, not a novel accusation of misconduct.
The Cost of the Misunderstanding
Abuse of discretion’s undeserved reputation has practical consequences. Counsel may make the claim they have harder to prove by equating it with bad faith. They may also decline to assert a valid claim at all, believing they cannot carry a burden that was never theirs. Either way, the claim is lost before it is ever tested.
A third cost is the least discussed. Counsel may avoid a valid abuse of discretion claim because it feels like accusing a contracting officer of bad faith. It shouldn’t. An abuse of discretion claim says nothing about character; it says only that there is no rational basis for the decision within the record on which the decision is based. A modest, non-accusatory claim should not be suppressed when the record supports it.
If abuse of discretion sounds accusatory when directed at a contracting officer, it is worth remembering how ordinary the same phrase sounds elsewhere. Appellate courts routinely reverse discretionary trial-court rulings based on abuse of discretion. No one reads “the trial judge abused his discretion in admitting that exhibit” as an accusation of improper motive. The words feel different in government contracts not because the test changed, but because abuse of discretion has been forced to keep company with bad faith.
Conclusion
A fifty-year-old footnote is a fitting place to end. In Kalvar, the court acknowledged that “many of our prior decisions seem implicitly to accept the equivalence of bad faith, abuse of discretion, and gross error.” That sentence has been cited for rigor it never claimed. Read fairly, it admits that the equivalence was assumed, not reasoned through. This article has tried to supply the missing reasoning, trace the borrowed vocabulary, separate motive-based bad faith from record-based abuse of discretion, and show that the claim’s difficult reputation was never earned on its own terms. The bar is not low, but it is ordinary — the same reasonableness bar that has governed contractual discretion since at least Kihlberg in 1878. Counsel should plead the claim when the record supports it.
Practice Points
- Identify the decision. Name the specific discretionary act being challenged, not the course of conduct around it.
- Anchor the challenge in the contemporaneous record. The question is what the contracting officer had in front of her at the time, not what the record later showed.
- Isolate the defect. Point to the missing reason, the false premise, the ignored constraint, or the unexplained leap from evidence to conclusion.
- Plead the ordinary burden. Abuse of discretion is proved by a preponderance; resist any suggestion that “clear abuse” imports clear and convincing evidence.
- Keep motive out of it. Do not recast a reasoning defect as animus unless the facts independently support bad faith—which is a different claim, with a different burden.
Authorities
Cases
ADT Construction Group, Inc., ASBCA No. 55358, 13-1 BCA ¶ 35,307 (2013)
Am-Pro Protective Agency, Inc. v. United States, 281 F.3d 1234 (Fed. Cir. 2002)
Empire Energy Management Systems, Inc., ASBCA No. 46741, 03-1 BCA ¶ 32,079 (2002)
Heyer Products Co. v. United States, 140 F. Supp. 409 (Ct. Cl. 1956)
John Reiner & Co. v. United States, 325 F.2d 438 (Ct. Cl. 1963)
Kalvar Corp. v. United States, 543 F.2d 1298 (Ct. Cl. 1976)
Keco Industries, Inc. v. United States, 492 F.2d 1200 (Ct. Cl. 1974)
Kihlberg v. United States, 97 U.S. 398 (1878)
Krygoski Construction Co. v. United States, 94 F.3d 1537 (Fed. Cir. 1996)
McDonnell Douglas Corp. v. United States, 182 F.3d 1319 (Fed. Cir. 1999)
Pacific Far East Line, Inc. v. United States, 394 F.2d 990 (Ct. Cl. 1968)
Ripley v. United States, 223 U.S. 695 (1912)
Salsbury Industries v. United States, 905 F.2d 1518 (Fed. Cir. 1990)
Securiforce International America, LLC v. United States, 879 F.3d 1354 (Fed. Cir. 2018)
T & M Distributors, Inc. v. United States, 185 F.3d 1279 (Fed. Cir. 1999)
TigerSwan, Inc. v. United States, 118 Fed. Cl. 447 (2014)
United States Fidelity & Guaranty Co. v. United States, 676 F.2d 622 (Ct. Cl. 1982)
Vibra-Tech Engineers, Inc. v. United States, 567 F. Supp. 484 (D. Colo. 1983)
Viktoria Transport GmbH & Co., KG, ASBCA No. 33591, 88-3 BCA ¶ 20,921 (1988)
27-35 Jackson Ave LLC v. United States, 127 F.4th 1314 (Fed. Cir. 2025)
Other Authorities
Frederick W. Claybrook, Jr., Good Faith in the Termination and Formation of Federal Contracts, 56 Md. L. Rev. 555 (1997)
Daniel E. Toomey et al., Good Faith and Fair Dealing: The Well-Nigh Irrefragable Need for a New Standard in Public Contract Law, 20 Pub. Cont. L.J. 87 (1990)