When it comes to the recoverability of Government Contract cost escalation claims and damages, construction contractors or businesses involved in services can find themselves at odds when submitting quantum damages claims against the federal government.
In response to the demand, the government might even argue on appeal that, as a matter of law, you cannot receive cost escalation damages because the contract did not contain an economic price escalation clause.
The general rule is that the risk of fluctuation of material or labor costs is borne by the contractor under a firm-fixed-price contract. See, Thorington Elec. & Constr. Co., ASBCA No. 56997, 12-1 BCA ,-[ 34,957 at 171,846.
To increase your chances of payment for quantum damages, or to increase the likelihood of a successful appeal to the Board, you want to show that your recoverability of cost escalation claims and damages arose from the delays caused by the government contracting agency.
The lack of an economic price escalation under the cost escalation claims clause in the construction contract does not preclude a contractor from recovering quantum damages for damages incurred due to government-caused delays. See J.D. Hedin Constr. Co. v. United States, 347 F.2d 235, 256 (Ct. Cl. 1965). These types of cases are fact specific. Therefore, submitting a proper CDA claim to the government is critical to your success. Read more about delays in construction contracts.
Legal Standard for Cost Escalation Clause Claims and Quantum Damages
To recover escalation rates for government contracts, your contract escalation claims must prove three elements:
- liability – that the government did something that changed the contractor’s costs for which the government is liable;
- causation – that there exists a causal nexus between the basis for liability and the claimed increase in costs; and
- resultant injury
In this level of government contract quantum damages appeal, the agency will most likely suggest that the delays were contemplated in the initial contract. This is why written communications with the government throughout the performance period is essential. Read information about Federal Cost Reimbursement Contracts.
For help with existing quantum damages and based on the recoverability of contract cost under price escalation in construction contracts or service contracts, call our government contract claims and dispute lawyers at 1-866-601-5518. FREE INITIAL CONSULTATION.