REA vs Claim :: FAR Equitable Adjustment Claims Changed to REA – ASBCA Has No Appellate Jurisdiction With REA Certification

This decision shows that legal issues when submitting an equitable adjustment can be a nightmare and cause the company to lose out of thousands of dollars.

In a recent case, the Armed Services Board of Contract Appeals (ASBCA) ruled that it had no appellate jurisdiction to hear an equitable adjustment case on appeal (REA certification case). In that case, the Army contracted with the appellant for paving and roofing in a shipyard.

The ultimate question for any contractor is whether you can appeal FAR equitable adjustment (REA) to the ASBCA. In the recent case, ASBCA first looked to see whether it even had jurisdiction. It is important to understand appeals courts must have jurisdiction to hear a case under the Contract Disputes Act if there is a contracting officer’s final decision, or in the event of no final decision, whether the claim can be deemed as denied. 41 USC 7103(f)(5), 7104(a).

The appellant’s attorneys argued that the request for equitable adjustment was a claim.  The ASBCA reminded the litigants that  “A contractor request need not be expressed in a particular form, but must manifest the intention to obtain a contracting officer’s final decision.” Citing Southern Automotive Wholesalers, Inc., ASBCA No. 53671.

What is a Contract Disputes Act Claim?

ASBCA reminded everyone that a “claim” is “a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to the contract.” Citing to Air Services, Inc., ASBCA No. 59843,  (quoting FAR 2.101).

ASBCA also stated that it reviews a Contract Disputes Act claims on a case-by-case basis, applying a common sense analysis. It will look at the totality of the correspondence between the government and the contractor in determining the sufficiency of a claim. Id.

A claim exceeding $100,000 must be certified under 41 USC 7103(b). The language of that certification also appears at Federal Acquisition Regulation FAR 33.207. In such a case, interest accrues from the date that the contracting officer receives the certification. See Industrial Contractors, Inc., ASBCA No. 31270, 91-3 BCA ii 24,053 at 120,421.

Does the Type of Contractor Certification Matter for ASBCA Jurisdiction?

First, so long as the claim is made in good faith, the legal analysis starts. In the above case, the ASBCA pointed out that there can be a significant impact on the type of certification language a contractor submits to the government. ASBCA suggested that a contractor’s certification under FAR 33.207s shows that an REA is intended to be a claim. Southern Automotive Wholesalers, 03-1 BCA ~ 32,158 at 158,998.

REA vs Claim  Certification

ASBCA said that if a contractor certifies a FAR equitable adjustment (REA) under DFARS 252.243-7002, this certification language shows that the contractor does not intend the REA to be a claim. Citing Certified Construction Co. of Kentucky, LLC, ASBCA No. 58782, 14-1BCA~35,662 at 174,572. An REA can be converted into a claim by the provision of a CDA certification and submit to the contracting officer for a final decision. See id. Although the contractor in the above case did certify its initial claim under FAR 33.207 and also asked for a contracting officer’s final decision. 

Costly REA Certification Mistake Made?

ASBCA would have probably heard the matter had the contractor not change its request for equitable adjustment certification language from FAR 33.207 to a DFARS 252.243-7002 REA certification. The legal effect if this mistake was that the contractor now changed his intent that the initial claim not be treated as a Contract Disputes Act Claim. The contractor changed his position before the contracting officer later issued its final decision.

The real questions are whether despite the contractor’s change of the REA Certification, the contracting officer’s final decision to still issue a denial on the original claim reverted back to the initial claim. Second, when is the contractor required to certify the request for contract adjustment? This was never raised but the ASBCA seemed to think not.

Could the REA Still be Converted Back to a Claim? 

The problem here is the certification language which changed the  original claim back to an REA. Although the Federal Circuit Court in Bill Strong Enterprises, Inc. v. Shannon suggested that an REA could be converted to a Claim when there is an impasse, the conversion to hinges on whether the proper CDA certification language is intact.

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For help with REA vs Claim equitable adjustment submissions, Request for Equitable Adjustment certification or disputes about a court’s appellate jurisdiction, call Watson & Associates LLC’s attorneys at 1-866-601-5518.