U.S. Government Contracting: Avoid Expensive Pitfalls in Preparing Your Contract Disputes Act (CDA) Claim for Damages

Author:  Cheryl Adams, Esq.

              You are a government contractor.  Something happened, and performance of your government contract just cost you more money.  Whatever it is, you’re pretty certain it was not your firm’s fault.  Should you just submit an invoice for the extra cost, and hope it gets paid?  

Well, you might do that, but if all you do is submit an invoice, you might not get paid.  You can preserve your rights, and stand a better chance to overturn a denied payment if you know how to submit a certified claim for damages that complies with the requirements of the Contract Disputes Act (CDA).

           Some of the highlights for submitting claims are provided below.  The facts and circumstances of each claim are different, so involving your attorney during the early part of claim preparation can save you money and aggravation later in the game.

WHAT IS THE CONTRACT DISPUTES ACT?

           41 U.S.C. 71 essentially provides a process for submitting claims to the Contracting Officer, requesting a Contracting Officer’s final decision, and appealing your claim to the appropriate court or board if the CO either denies the claim or fails to issue a CO final decision “within a reasonable time.”

           U.S. federal government contracts almost always include clauses implementing the Contract Disputes Act.  FAR 52.233-1 Disputes (May 2014) is typical. Paragraph (c) of the Disputes clause sets forth the basic requirements for a valid CDA claim, as well as making it clear that your basic garden-variety invoice is not a claim.

“‘Claim,’ as used in this clause, means 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 this contract. However, a written demand or written assertion by the Contractor seeking the payment of money exceeding $100,000 is not a claim under 41 U.S.C chapter 71 until certified. A voucher, invoice, or other routine request for payment that is not in dispute when submitted is not a claim under 41 U.S.C chapter 71. The submission may be converted to a claim under 41 U.S.C chapter 71, by complying with the submission and certification requirements of this clause, if it is disputed either as to liability or amount or is not acted upon in a reasonable time.”

AVOIDABLE COMMON MISTAKES WITH CDA BASICS:

The Disputes clause requirements appear simple, but case law shows that contractors make mistakes with the basics all the time.  There is a surprisingly large body of recent case law on the subject of non-compliance with Contract Disputes Act basics.  Below are a few recent examples:

FIRST STEP:  PRESENT THE CLAIM TO THE CONTRACTING OFFICER

If your relationship with the Contracting Officer is not the best, it may be tempting to go straight to the courts or boards with your claim.  The lesson learned is:  Do not skip the step of first presenting your claim to the Contracting Officer for a decision. 

Here, jurisdiction was denied because of the “presentment” requirement of the Contract Disputes Act.  The presentment requirement states, “requires that written contractor claims be presented to a contracting officer for final decision before such claims may be litigated in this court.”

You cannot necessarily go back after the fact, and fix the problem.  “Belatedly submitting a certified claim to a CO once a claim is in litigation is not a cure for failing to present a claim to the co before filing suit in this court… once a claim is in litigation, any action by a CO on a later-submitted claim is a “nullity” and cannot establish jurisdiction over the claim…”  Philip Emiabata, d/b/A Philema Brothers, U.S. Court of Claims, 17-447C (Nov. 17, 2017) https://ecf.cofc.uscourts.gov/cgi-bin/show_public_doc?2017cv0447-18-0

           THE U.S. GOVERNMENT MUST BE A PARTY:  This may seem obvious, but in order to pursue a successful Contract Disputes Act claim, at least one of the parties to the contract must be the U.S. government.  Complex contracting arrangements can work to a contractor’s detriment, by confusing the issue of whether one of the parties is, in fact, the U.S. government. 

In a recent case, multiple entities, U.S. and Iraqi, were involved in the task order award process.  The court found that the  U.S. government was merely an agent, or a contract administrator, instead of an actual contracting party.  The contract in question was not “made by” an executive, agency, therefore, the ASBCA had no jurisdiction over the claim, under the CDA.(Agility Logistics Services Company KSC, v. James N. Mattis, Secretary of Defence, Ryan D. McCarthy, Acting Secretary of the Army, U.S. Court of Appeals for the Fed. Cir, 2015-1555 (Apr. 16, 2018)). 

           In another recent case, the USDA approved the contract as required, the contractor incurred expenses, but the claim was denied because the contract plainly stated that “[n]either the United States nor any of its departments, agencies, or employees is or will be a party to this CONTRACT[.]”   C & L Group, LLC and Makko Construction, LLC v. US, U.S. Court of Fed. Claims, 18-536C (Nov. 28, 2018). 

            SUM CERTAIN:  CDA allows claims for non-monetary relief (interpretation of contract terms, etc.).  However, if you are asking for money, you need to ask for a “sum certain.”  While contractors asking for an estimated amount often do fulfill the requirement for a valid claim, cases where reserving the right to in the future add or modify the amounts requested generally fail.

           Northrop’s fixed price $874 million U.S. Postal Service case involved various claims and counter-claims, all of which were dismissed on various grounds.  One of the claims was dismissed for failure to state a “sum certain.”  The basic requirement is “…a clear and unequivocal statement that gives the contracting officer adequate notice of the basis and amount of the claim.”  The court saw Northrop’s request as an attempt to circumvent the requirement to state a sum certain in its claim by camouflaging a monetary claim as one seeking only declaratory relief.  Northrop requested the government, “…to reform the contract to a cost-plus-fixed-fee structure, pursuant to which [Northrop] shall be reimbursed for all allowable and reasonable costs allocable to this Contract . . . plus a reasonable fee thereon.”  The court decided this was a request for monetary relief, and therefore a sum certain (a dollar amount) was required in order for the CDA claim requirements to be satisfied.  Northrop Grumman Systems, Corp. v. US, US Court of Fed. Claims, 12-286C (Oct. 31, 2018) .

WHAT IS A PROPERLY CERTIFIED CLAIM, AND WHY WOULD I NEED ONE?

           The Federal Acquisition Regulation (FAR) contains various different kinds of certifications, and certification language.  Some of the FAR-provided certification language is not enough to preserve your rights in the event of an appeal.  It is just as easy to sign a certification that protects your rights, as to sign something that falls short if you need to appeal, but you need to pick the right language.

           See FAR 52.233-1 Disputes, para. (d)(2)(iii), for the language:

“The certification shall state as follows: “I certify that the claim is made in good faith; that the supporting data are accurate and complete to the best of my knowledge and belief; that the amount requested accurately reflects the contract adjustment for which the Contractor believes the Government is liable; and that I am authorized to certify the claim on behalf of the Contractor.

           Note that FAR 15.403-4 provides different language, and a different threshold, $750,000, for certified cost and pricing data.  Again, that’s the threshold for requiring certified cost and pricing data – possibly needed for the documentation you submit to support the amount and validity of your claim.  The Department of Defense threshold for requiring certified cost and pricing data is $2 million (see class deviation memorandum dated 4/13/2018 ).  There can be other requirements, as well.  The point is the CDA certification may not be the only one you need, depending on the specific details of your claim.

The FAR 52.233-1 Disputes certification is only required for claims over $100,000.  However, there can be advantages to certifying claims that are less than $100,000.  A certification on your claim can reduce or eliminate questions regarding whether your claim is a claim, or regarding the date the claim was submitted.  Reducing or eliminating that area of ambiguity can be helpful if you need to appeal.  A best practice in most situations is to simply certify all claims using the CDA language, regardless whether FAR actually requires the certification.

While as a general rule, it is a better idea to provide a certification you don’t need than to accidentally fail to provide a required certification and lose your rights, there are exceptions to that general rule.  For example, it is good to be aware that false or erroneous certifications can result in severe penalties for the person or entity who signs.  If you’re on questionable ground, maybe re-think whether you want to provide a certification that isn’t strictly necessary.

HOW LONG IS A “REASONABLE TIME” TO WAIT FOR A CO DECISION?

           How long is a “reasonable time” to wait?  CDA Section 7103 calls for flexibility, “…in accordance with agency regulations, taking into account such factors as the size and complexity of the claim and the adequacy of information in support of the claim provided by the contractor.”  CDA Section 7103(f)(3).

           How long to wait before pushing the CO for a decision is a judgment call.  Of course, the CO has a certain amount of discretion over whether to pay or deny a claim, or allow costs associated with a claim.  It can be a mistake to push too hard for a decision.  You don’t want to be the obnoxious contractor who inspires the CO to make a point of approving the smallest amount of money the CO can justify giving you.  That said, businesses need to get paid, and you can’t wait forever to pay your suppliers, subcontractors, and other business expenses. 

One possible recourse, if the CO is taking too long to decide, is to petition a court or board to direct the CO to issue a decision.  “(f)(4) A contractor may request the tribunal concerned to direct a contracting officer to issue a decision in a specified period of time, as determined by the tribunal concerned, in the event of undue delay on the part of the contracting officer.” Section 7103, para. (f)(4).

            We all know the government can be slow, including slow to pay.  The consolation prize for slow payment is interest:  simple interest paid at the U.S. Treasury rate, calculated from the date the CO receives the claim.

HOW LONG CAN I WAIT TO APPEAL?  THE COURT AND BOARD DEADLINES:

           Under the Contract Disputes Act, a claim must be submitted to the CO within six years of accrual, except for fraud cases.  However, to appeal a CO final decision, the timeframe can be much shorter.  For example, notice of appeals to ASBCA and CBCA should be filed within 90 days of the CO decision (ASBCA Rule 1, and CBCA Rule 2).  The U.S. Court of Federal Claims, the Government Accountability Office, and other forums can hear various kinds of government contract claims as well.

One example where usual options for civilian agency appeals do not apply is the Federal Aviation Administration (FAA).  FAA has its own specialized procurement system, it does not use FAR.  Starting in 1996, Congress gave the agency a mandate to create its own home-grown Acquisition Management System (AMS).  See DOT Appropriation Act of 1996 (Public Law 104-50).  Pursuant to 49 U.S.C. §106(f)(2), §§40101, et seq., §46101, et. seq., §40110 and 14 C.F.R. Parts 14 and 17, all bid protests and contract disputes must go before FAA’s Office of Dispute Resolution for Acquisition (ODRA), which has exclusive subject matter jurisdiction.  

FAA’s disputes clause, 3.9.1-1 Contract Disputes (October 2011) contains some of the same requirements as the FAR’s Disputes clause and Contract Disputes Act.  For example, a claim must be in writing, request for sum certain, interest is paid, etc.  However, the procedure for filing, and some of the other requirements for claims and appeals of claims are quite different from the rest of the government.  The deadline is two years from the date of accrual of the claim.  Judicial review of ODRA decisions is described in FAA clause 3.9.1-1, which provides that “Judicial review, where available, will be in accordance with 49 U.S.C. 46110 and shall apply only to final agency decisions. A contractor may seek review of a final FAA decision only after its administrative remedies have been exhausted.” 

LESSONS LEARNED:

           Contract Disputes Act Claims are the usual way to get payment from the government when contract performance suddenly becomes more expensive.  First, you need to know what the contract Disputes clause states.  Not all government agencies handle disputes the same way, and failure to comply with the requirements can be fatal to your claim or your appeal if the claim is denied. 

Know the basics, including:

• Verify that your contract is, in fact, with the U.S. Government, not some other entity.
• Don’t skip the “presentment” requirement to first submit the claim to the federal Contracting Officer.
• If you’re asking for money, make sure you understand the need to state a “sum certain.”
• Understand certification requirements, and use the correct certification language in order to preserve your rights.
• Understand the timelines and filing deadlines for the various boards and courts where you can appeal your Contract Disputes Act claim if the CO denies it.

For a free and confidential consultation with government contracts attorney Cheryl Adams call Watson & Associates, LLC on 1-800-601-5518 or 720-941-7200.