Tag Archives: Contract Disputes Act

ONLY A CONTRACTOR CAN APPEAL A CONTRACTING OFFICER’S FINAL DECISION

Posted on by

A recent decision from the Civilian Board of Contract Appeals confirms that “only a ‘contractor’ may file an appeal of a contracting officer’s final decision.”  Wattiker v. General Services Administration, 2026 WL 846001 (CBCA 2026) (citation omitted).

The term “contractor is not an ambiguous term. A ‘contractor’ refers to a party to a federal government contract.  Wattiker (citing the Contract Disputes Act). This is why the Contract Disputes Act does not apply to parties that are NOT in contract with the federal government. Id.

In Wattiker, an appellant (appealing party) challenged the dismissal of a co-appellant. The co-appellant was dismissed because he was not a contractor, i.e., a party in contract with the federal government.  In other words, the co-appellant had no privity of contract with the federal government.

It is this analysis why subcontractors have no standing to pursue a Contract Disputes Act claim or can pursue a claim or appeal a claim in their own name against the federal government. To do so, they would need a liquidation agreement or pass-through agreement that lets them pursue a pass-through claim in the name of the contractor, i.e., the prime contractor that hired the subcontractor and is in privity of contract with the federal government.

If performing construction on a federal project, make sure you understand your rights as a government contractor, as a subcontractor, etc.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

 

CONTRACT DISPUTES ACT AND JURISDICTIONAL REQUIREMENTS

Posted on by

When dealing with a claim on a federal construction project, there are a couple of key background jurisdictional points. These points were briefly highlighted in the recent appeal, Mega Star Logistics Service Co. v. Department of State, CBCA 8232, 2026 WL 253738 (CBCA 2026).  Here are the two points.

FIRST, when it comes to jurisdiction, for a board of contract appeals “to exercise jurisdiction over a claim, the CDA [Contract Disputes Act] requires the contractor to submit a written claim to the contracting officer for a COFD [contracting officer final decision], with a subsequent appeal of the COFD or deemed denial if the CO [contracting officer] does not issue a COFD.”  Thus, you need to submit a formal claim under the Contract Disputes Act to the contracting officer to get a final decision from the contracting officer (or the contracting officer waiving the final decision by not timely furnishing one). Mega Star Logistics, supra.

SECOND, “[s]hould a contractor choose to appeal to the Board [of Contract Appeals], the CDA requires that the contractor file is appeal no more than ninety days following receipt of the COFD.” Megal Star Logistics, supra.  Thus, once you get the final decision from the contracting officer, if you plan to appeal, you need to do so within 90 days.

Both these jurisdictional points are important.

Remember to (1) formally submit your claim under the Contract Disputes Act, and (2) file your appeal within 90 days from receipt of the contracting officer’s final decision. Even if you don’t get a final decision, treat the untimely response by the contracting officer as a “deemed denial” and timely file your appeal within the 90 days after the deemed denial (the time for the contracting officer to render a final decision has come and gone).

If you blow these points off, then you will face a motion to dismiss which will be granted because there won’t be jurisdiction to properly hear your appealed claim!

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

A CONTRACT IS A CONTRACT: RELEASES AND CHANGE ORDERS / BILATERAL MODIFICATIONS ARE CONSTRUED AS CONTRACTS

Posted on by

A contract is a contract. It should say what it means and means what it says.  A release is construed like a contract. A change order or bilateral modification is construed like a contract. The decision out of the United States Court of Federal Claims, B.L. Harbert International, LLC v. US, 2025 WL 914388 (Fed.Cl. 2025), serves as a case on point.

In this case, the contractor had a claim related to a bilateral modification (i.e., change order #1) on a federal project which included a two-month extension of time to complete the contractor’s work. The modification stated the contractor and the contractor’s subcontractors waived the right to seek compensation for any other delays relating to the work.  “When a contractor signs a general release, it is barred from seeking damages for the events connected to and contemplated by the release.” B.L. Harbert International, supra, at *4.  Thus, the contractor’s claims related to this modification were waived.

The contractor also had claims related to two other bilateral modifications (i.e., change orders #2 and #3). The modification #3 left open any time extension due to the changed work and costs associated with the time extension because it was uncertain whether such work would result in a delay. However, the work did NOT cause a delay. The contractor accelerated its subcontractor and had the work completed ahead of schedule. The contractor claimed it was entitled to the additional costs associated with the acceleration. But the acceleration is NOT a time extension or delay. “[The contractor] could have negotiated with the Corps to cover acceleration costs that would prevent any further extensions of time, but it is too late to make that change to the contract after the fact.” B.L. Harbert, supra, at #4. In other words, modification #3 resolved the contractor’s costs for additional work other than a time extension and costs associated with a time extension. But a time extension was never needed. Thus, the contractor waived any costs for acceleration.

The contractor made another argument to counter the specific language in the modifications. It argued mutual mistake.

The contractor argued that the parties understood that the modifications did not cover the contractor’s additional costs as reflected in letters the contractor sent the government prior to the modifications. Therefore, the contractor claimed there was no meeting of the minds if the government’s position is different.

Under universal contract interpretation and each executed modification is a contract, “when contract provisions are clear and unambiguous, they must be given their plain and ordinary meaning.” B.L. Harbert, supra, at *5 (internal quotation and citated omitted).  The modifications were clear and unambiguous.

Next, the contractor never presented its request for contract reformation due to mutual mistake to the government’s contracting officer, and the court can only review claims presented and certified to the contracting officer under the Contract Disputes Act. Regardless, the contractor couldn’t satisfy the requirements of mutual mistake.  “To show a mutual mistake, [the contractor] must meet four elements by clear and convincing evidence, including demonstrating that ‘the parties to the contract were mistaken in their belief regarding a fact … [and] the contract did not put the risk of the mistake on the party seeking reformation.’” B.L. Harbert International, LLC, supra, at *5 (citation omitted). The contractor had to show that “the parties shared a mutual mistake,” which it could not factually demonstrate. See id.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

GOVERNMENT’S TERMINATION OF CONTRACTOR FOR DEFAULT FOR FAILURE-TO-MAKE PROGRESS

Posted on by

Whenever you elect to terminate the other party for cause or for default, you need to JUSTIFY the basis of the cause or default. The reason being is that a termination for default or cause is the harshest contractual remedy. This is why the other party will typically either (i) convert the termination for default into one for convenience, or (ii) if there is no termination for convenience provision in the contract, argue the terminating party breached the contract by terminating the contract without rightful justification.

The key is if you are going to terminate a party for cause of default, make sure you have memorialized the persuasive reasons for exercising the termination, and can otherwise reasonably support the justification.  Do not, and I repeat, do not haphazardly exercise a termination for default and think you do not have to justify the basis for the termination.

In the federal arena on a federal construction project, “[w]hen a contracting officer terminates a contract for default, and the contractor appeals that termination decision, ‘the government…bear[s] the burden of proof with respect to the issue of whether termination for default was justified.’” Department of Transportation v. Eagle Peak Rock and Paving, Inc., 2023 WL 3829625, *4 (Fed. Civ. 2023) (citation omitted).

In Eagle Peak Rock and Paving, the government terminated the contractor for cause for not maintaining progress, i.e., the contractor was not going to timely complete the project. “In failure-to-make-progress cases, the government must establish that ‘the contracting officer’s decision to terminate…was reasonable given the events that occurred before the termination decision was made.’ If the government makes this showing, the contractor then bears the ‘burden of providing that its nonperformance was excusable.’” Eagle Peak Rock and Paving, supra, at *4 (internal citations omitted).

On the often-central issue of whether it was reasonable to view timely completion as not reasonably likely, the tribunal must focus on ‘tangible, direct evidence reflecting the impairment of timely completion. In particular, the [tribunal] must ‘decide the actual performance that the contract requires and the amount of time remaining for performance’ and ‘may also consider’ factors such as ‘the contracting officer’s testimony and contemporaneously documents[,]…a comparison of the percentage of work completed and the amount of time remaining under the contract, the contractor’s failure to meet progress milestones, problems with subcontractors and suppliers, the contractor’s financial situation,…a contractor’s performance history, and other pertinent circumstances.’ This is a de novo adjudication: If the adjudicatory tribunal finds, based on all the evidence before it, that the standard for termination under the contract’s default clause is met, it is to uphold that decision whether or not the contracting officer stated the basis for that finding.

Eagle Peak Rock and Paving, supra, at *4 (internal citations omitted).

Importantly, “the termination-for-default decision must be performance-based and not pretextual.” Eagle Peak Rock and Paving, supra, at *5 (citation omitted).  There must be a connection between the decision to terminate for default and the terminated contractor’s performance.  Id. (citation omitted).

[A]s long as ‘the termination for default was predicated on contract-related issues,’ i.e., ‘the government’s default termination was not pretextual or unrelated to Contractor’s alleged inability to fulfill their obligations under the contract,’ the reasoning of the contracting officer at the time of termination is not the subject of the [Contract Disputes Act] adjudication, must proceed on the evidence and arguments made in the adjudicatory proceeding, not through arbitrary-and-capricious or abuse-of-discretion review. Of course, the substantive contract standard in its endangerment-of-timely-completion component, doubly considers what is ‘reasonable’—whether it was ‘reasonable’ to find that there was no ‘reasonable likelihood’ of timely completion.

 Eagle Peak Rock and Paving, supra, at *5 (internal citation omitted).

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

WHEN A REQUEST FOR EQUITABLE ADJUSTMENT SHOULD BE TREATED AS A CLAIM UNDER THE CONTRACT DISPUTES ACT

Posted on by

In federal contracting, contractors are sometimes torn about submitting a request for equitable adjustment (known as an “REA” under 48 C.F.R. 252.243-7002) or submitting a formal claim under the Contract Disputes Act (41 U.S.C. s. 7103), the latter requiring a final decision by the contracting officer and starts the clock with respect to interest and preserving rights.  It is also sometimes not easy for the contracting officer receiving an REA to determine whether the REA is actually a claim under the Contract Disputes Act requiring more immediate action. This recent take by the United States Court of Appeals for the Federal Circuit hits the nail on the head:

We recognize that contracting officers will sometimes face the difficult challenge of determining whether a request for equitable adjustment is also a claim. Contractors must choose between submitting a claim—which starts the interest clock but requires the contracting officer to issue a final decision within 60 days—and submitting a mere request for equitable adjustment—which does not start the interest clock but gives the contractor more time to negotiate a settlement and possibly avoid hefty legal fees.  The overlap between these two types of documents might create room for gamesmanship. For example, a contractor could submit a document that is a claim—starting the interest clock—but appears to be a mere request for equitable adjustment—causing the contracting officer to not issue a final decision within the 60-day deadline and allowing interest to accrue for months or years. But the government has tools to address this challenge: The contracting officer can communicate to the contractor that she is going to treat the document as a claim and issue a final decision within 60 days. Or the government can explicitly require the contractor to propose settlement terms and attempt to settle disputes before submitting a claim to the contracting officer for a final decision.

Zafer Construction Company v. U.S., 2022 WL 2793596, *5 (Fed.Cir. 2022).

Zafer Construction Company involved a design-build contractor on a federal project that submitted an REA for delays and changes caused by the government. Notably, both REAs and formal claims under the Contract Disputes Act (that are more than $100,000) require contractor certifications; however, the certification of a formal claim is a more robust certification than a certification of an REA.  In Zafer, the design-build contractor certified its claim with the more robust certification per the Contract Disputes Act (41 U.S.C. s. 7103).

After many years of the contractor trying to negotiate a resolution to its REA, it asked the government to convert the REA to a formal claim.  The contracting officer determined the formal claim was time-barred because much of it occurred more than six years before the contractor made its request to convert the REA into a claim.

The contractor sued the government in the Court of Federal Claims. Unfortunately, the Court of Federal Claims found that the claim was time-barred.  Even though the contractor submitted an REA, an REA is not a formal claim under the Contract Disputes Act.  The contractor appealed to the United States Court of Appeals for the Federal Circuit.

A claim in federal contracting is no different than a claim in private contracting: “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.” Zafer, supra, at *1 quoting 48 C.F.R. 42-233-1(c).

Under the Contract Disputes Act, claims of more than $100,000 must include a specific “good faith” certification. See 41 U.S.C. s. 7103.  Also, “a contractor must show that ‘what the contractor desires by its submissions is a final decision’ from the contracting officer determining whether the contractor is entitled to the claimed amount.” Zafer, supra, at *2 (citation omitted).  The contractor’s request for a final decision can be explicit or implicit.  Id.  In other words, no magic words necessarily need to be used and “a request for equitable adjustment can constitute a claim.”  Id.

The contractor argued its initial REA satisfied the requirements of a formal claim under the Contract Disputes Act because “the document at length discusses [contractor’s] request for money owed, showing that [contractor] intended for the contracting officer to make a decision regarding entitlement.”  Zafer, supra, at *2.  The government disagreed stating the contractor clearly intended to only negotiate its REA and not receive a final decision.

The United States Court of Appeals, however, found that the contractor’s subjective intent is of no moment.  “The determination focuses on whether, objectively, the document’s content and the context surrounding the document’s submission put the contracting officer on notice that the document is a claim requesting a final decision.” Zafer, supra, at *2.  Through this objective approach in reviewing the REA submission, the United States Court of Appeals held it implicitly requested a final decision and, therefore, satisfied the formal claim requirements under the Contract Disputes Act.

If you are a federal contractor, it is important to understand the difference between submitting an REA and submitting a formal claim to ensure your rights are preserved moving forward.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

UNDERSTAND THE DISPUTE RESOLUTION PROVISION YOU ARE AGREEING TO

Posted on by

When negotiating a contract, do not overlook the dispute resolution provision.  It is one of the more important provisions in your construction contract.   This provision will come into play and have ramifications if there is a dispute, which is certainly not uncommon on a construction project.

In dispute resolution provisions in subcontracts on federal projects, it is not unusual for that provision to include language that requires the subcontractor to STAY any dispute that concerns actions or inactions of the owner pending the resolution of any dispute between the owner and prime contractor relating to that action or inaction.   A provision to this effect should be included for the benefit of the prime contractor.  For instance, the provision may say the subcontractor agrees to stay any such claim against the prime contractor or prime contractor’s surety pending the outcome of any pass-through claim (or otherwise) submitted under the Contract Disputes Act.

For example, in U.S.A. f/u/b/o Ballard Marine Construction, LLC v. Nova Group, Inc., 2021 WL 3174799 (W.D. Wash. 2021), a prime contractor hired a subcontractor to perform a scope of work at a naval shipyard.  A differing site condition was encountered and the subcontractor was directed to continue performance and track its costs.  The subcontractor completed its work and submitted its approximate $13 Million claim from the prime contractor and its Miller Act payment bond surety.  The prime contractor and surety refused to pay until the resolution of the pass-through differing site conditions claim to the federal government.  The prime contractor had submitted a claim under the Contract Disputes Act to the federal government.  The subcontractor was not interested in waiting until the resolution of the Contract Disputes Act claim and filed suit against the prime contractor and Miller Act payment bond surety.  The prime contractor and surety moved to stay pending the outcome of the Contract Dispute Acts claim.  The trial court agreed with the prime contractor explaining, “It is not fruitful to require [the prime contractor] to fend off [the subcontractor’s] claim against it, and the [Miller Act] sureties [the prime contractor] agreed to indemnify, while simultaneously advancing [the subcontractor’s] claim for additional payment from the government through the ongoing CDA process.  [The subcontractor] agreed to such a dispute resolution procedure, and it does not claim that the increased costs were [the prime contractor’s] fault.”  Nova Group, supra, at *8.

A subcontractor with such a provision is still required to timely perfect and preserve its rights by timely filing a lawsuit against the Miller Act payment bond surety.  However, the subcontractor is now beholden to the Contract Dispute Act procedure which requires an initial decision by the contracting officer and, then, certain appeal rights.   This is not what the subcontractor wanted because it elongates any potential resolution.  However, this is what the subcontractor agreed to in the dispute resolution provision and benefits the prime contractor so that it does not have to fight the fight on two fronts, particularly when it is supporting the pass-through claim under the Contract Disputes Act claim process.

Remember, the dispute resolution provision in your contract is important and should not be overlooked; the provision has ramifications as shown in the above case!

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

PERFORMANCE BOND SURETY’S EQUITABLE SUBROGATION CLAIM AGAINST OWNER

Posted on by

There are circumstances where a performance bond surety will pursue a claim against an owner – such as a government owner—and assert an equitable subrogation claim.  A performance bond surety may assert an equitable subrogation claim to recover contract funds that are still in the government’s control after the contract is completed or to recover from the government when the government improperly disburses progress payments to the defaulted contractor (principal of the performance bond).   Capitol Indemnity Corp. v. U.S., 2020 WL 877687, n.7 (Fed.Cl. 2020).  As to the improper disbursement of progress payments, a performance bond surety is asserting a claim against the owner in this fashion when it has had to pay under the bond and believes certain rights of it were prejudiced based on improper payments by the owner — it would have had to pay less based on the contractors’ default had the owner not impermissibly paid the defaulted contractor.

[A]n equitable subrogation claim is based on the theory “that the triggering of a surety’s bond obligation gives rise to an implied assignment of rights by operation of law whereby the surety ‘is subrogated to the [principal obligor’s] property rights in the contract balance.’ ” “[A] legally enforceableduty can arise between the government and a surety if the surety notifies the government that its principal is in default of the bond agreement.” Thecourt in a case affirmed by the Federal Circuit has also recognized that notice to the government that the contractor “is in danger of defaulting under the bond” from other sources besides the surety may be adequate to trigger the assignment of rights to the surety.  Finally, a surety’s equitable subrogation rights can be triggered where the government “had knowledge of the default … and so informed the surety.”

Capitol Indemnity Corp., supra, at *7 (internal citations omitted).

An example of a performance bond surety asserting an equitable subrogation claim against the government can be found in Capitol Indemnity Corp.   Here, a contractor was hired to renovate a building and complete the renovation by September 30, 2015.    After numerous letters to the contractor including cure notices relating to non-conforming work, on December 30, 2015, the government notified the contractor’s performance bond surety that the contractor’s work was not complete and the surety should be receiving payment bond claims from unpaid subcontractors.  A few days later, the government suspended the contract and copied the surety.   The surety claims that after this date, the government impermissibly made payment to the contractor even though the surety requested any such payment to the contractor be in the form of joint checks to the contractor and corresponding subcontractor.  A couple of months later, in March 2016, the government declared the contractor in default.  The surety entered into a takeover agreement with the government to complete the defaulted contractor’s work, which reserved certain rights of the surety to pursue claims against the government.

Around the time the takeover work was complete, the surety sued the government.  One of the arguments the surety raised was equitable subrogation as to impermissible payments the government made to the contractor.  Stated differently, the surety claimed that the government abused its discretion (and prejudiced the surety) in making payment to the contractor when it knew the contractor was in default.  The government moved to dismiss the surety’s equitable subrogation claim.

Initially, as to a jurisdictional argument, the US Court of Federal Claims held that the surety can sue the government in equitable subrogation without having to first raise this issue to the contracting officer through submitting a claim under the Contract Disputes Act.

Next, the US Court of Federal Claims found that the alleged facts raised by the surety as to payment to the contractor shortly before the contractor was defaulted was enough to trigger a surety’s equitable subrogation claim against the government.  The surety raised facts to support that its equitable subrogation rights were triggered on December 30, 2015 when (i) the government notified the surety that the contractor’s work was not complete and the surety should expect to receive payment bond claims, (ii) the government then suspended the contractor’s performance a few days later, (iii) the surety requested that the government issue joint checks to the contractor and unpaid subcontractors, and (iv) the government refused to issue joint checks and paid the contractor directly only to default the contractor a couple of months later.   The direct payment to the contractor was an impermissible payment, and through equitable subrogation, the government may owe the surety the amount of that payment irrespective of the fact that the government already paid that amount to the defaulted contractor.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

CERTIFYING CLAIM UNDER CONTRACT DISPUTES ACT

Posted on by

Under the Contract Disputes Act (41 USC 7101 en seq.), when a contractor submits a claim to the government in excess of $100,000, the claim MUST contain a certification of good faith, as follows:

For claims of more than $100,000 made by a contractor, the contractor shall certify that–

(A) the claim is made in good faith;

(B) the supporting data are accurate and complete to the best of the contractor’s knowledge and belief;

(C) the amount requested accurately reflects the contract adjustment for which the contractor believes the Federal Government is liable; and

(D) the certifier is authorized to certify the claim on behalf of the contractor.

41 U.S.C. 7103(b)(1).  See also 48 C.F.R. s. 33.207(c) as to the wording of the certification.

The contracting officer is not required to render a final decision on the claim within 60 days if, during this time period, he/she notifies the contractor of the reasons why the certification is defective. 41 U.S.C. 7103(b)(3).   Importantly, the contracting officer’s failure to render a decision within 60 days is deemed an appealable denial.

However, “[a] defect in the certification of a claim does not deprive a court or an agency board of jurisdiction over the claim. Prior to the entry of a final judgment by a court or a decision by an agency board, the court or agency board shall require a defective certification to be corrected.”  Id.

This is important.  In a recent decision out of the Federal Circuit, DAI Global, LLC v. Administrator of the United States Agency for International Development, 945 F.3d 1196 (Fed. Cir. 2019), a government contractor submitted a claim to the government with a defective certification.   The contracting officer waited 70 days (not the required 60 days) before notifying the contractor that the claims did not contain the required certification.   The contractor (smartly interpreting the contracting officer’s untimely notification as a denial of the claim) appealed to the Civilian Board of Contract Appeals.   The Board dismissed the contractor’s claims for lack of jurisdiction claiming the contractor failed to certify the claims and the contractor’s errors in preparing the certification were not correctible.  The contractor appealed to the United States Court of Appeals, Federal Circuit.

First, the appellate court held that the Contract Disputes Act states that a defect in the certification does NOT deprive a board over jurisdiction.  Whether the defect is technical in nature or not is of no moment since a board is not deprived of jurisdiction if there is any defect in the certification.

Second, the appellate court held that that the contracting officer failed to timely notify the contractor of the defective certification.  It was required to either issue a final decision on the claim or notify the contractor of the defective certification within 60 days.  “Because the contracting officer failed to issue a decision within the statutory period [60 days], [the contractor’s] claim was deemed denied and became appealable to the Board.” DAI Global, LLC, supra.

It is always good practice to work with counsel when preparing or submitting a claim.  Here, the contractor had good counsel as counsel treated the contracting officer’s untimely notification to the contractor of a defective certification as an appealable denial of the claim.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

DOES YOUR REQUEST FOR EQUITABLE ADJUSTMENT (REA) COMPLY WITH THE CONTRACT DISPUTES ACT?

Posted on by


Under a federal construction contract, a contractor MUST comply with the Contract Disputes Act and request a final decision from the contracting officer in order for the United States Court of Federal Claims to have jurisdiction over the claim.  This means that in most instances a request for an equitable adjustment (REA) will not meet the requirements of the Contract Disputes Act, meaning the Court of Federal Claims will not have jurisdiction to resolve a disputed REA. This is an important distinction for contractors that work on federal construction projects that submit requests for equitable adjustments and best articulated by the Court of Federal Claims:

  

Under the CDA [Contract Disputes Act], the Court only has subject matter jurisdiction over a contract action against the Government if the action is filed within twelve months after receipt of a contracting officer’s final decision on the claim.  Therefore, both a contractor’s claim and the contracting officer’s final decision on that claim are jurisdictional requirements. Logically, there can be no contracting officer’s final decision on a claim if the contractor has not requested such a decision from the contracting officer. A request for a contracting officer’s final decision need not be explicitly labeled as such. For example, an REA under certain circumstances can be construed as a request for a contracting officer’s final decision.  However, a request for a contracting officer’s final decision must, at minimum, be a written demand that includes (1) adequate notice of the basis and amount of a claim and (2) a request for a final decision.

Zafer Taahut Insaat ve Ticaret, A.S. v. United States, 2016 WL 7176723, *3 (Fed.Cl. 2016) (internal quotations and citations omitted).

 

In Zafer Taahut Insaat ve Ticaret, a contractor submitted an REA for unanticipated costs in incurred on a foreign construction project.  In the REA, the contractor simply asked the government to review and evaluate the REA at the earliest convenience.   The REA was not sent directly to the contracting officer.  The government did not pay the REA and the contractor filed suit in the Court of Federal Claims.  The government moved to dismiss the lawsuit based on the contractor’s failure to comply with the Contract Disputes Act.  The Court granted the motion to dismiss because (1) the REA was not sent directly to the contracting officer and (2) the REA did not request the contracting officer issue a final decision under the Contract Disputes Act.   Hence, the Court did not have jurisdiction to resolve the claim.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

SUBCONTRACTOR PASS-THROUGH CLAIMS AND THE CONTRACT DISPUTES ACT

Posted on by


A prime contractor submitting a subcontractor’s pass-through claim MUST still comply with the certification requirements in the Contract Disputes Act.  And, the prime contractor cannot sponsor a pass-through claim unless it remains liable to the subcontractor for the claim, a doctrine known as the Severin doctrine based on the decision Severin v. U.S., 99 Ct.Cl. 435 (Ct.Cl. 1943).  These are important concepts for a prime contractor and subcontractor to understand and appreciate on federal projects.

 

Certification of Pass-Through Claims

 

For claims of more that $100,000  (including subcontractor pass-through claims) submitted to the federal government, the contractor must certify:

(A) the claim is made in good faith;

(B) the supporting data are accurate and complete to the best of the contractor’s knowledge and belief;

(C) the amount requested accurately reflects the contract adjustment for which the contractor believes the Federal Government is liable; and

(D) the certifier is authorized to certify the claim on behalf of the contractor.

40 U.S.C. s. 7103(b).

 

The certification of the claim is defective if it does not include these four elements (set forth in (A) through (D) above).

 

However, if the certification is defective, this can be cured prior to final judgment by a court or a final decision by a federal agency. See M.K. Ferguson Co. v. U.S., 2016 WL 1551650 (Fed.Cl. April 14, 2016).   On the other hand, a failure to certify (versus a defective certification) cannot be cured meaning the contractor has not submitted a proper claim under the Contract Disputes Act. Id.

 

Severin Doctrine

 

According to the Severin doctrine, “a prime contractor may not sponsor a pass-through claim unless it remains liable to its subcontractor on the underlying claim.” M.K. Ferguson, supra, at *13. If the federal government is relying on the Severin doctrine:

(1) the burden is on the government to prove that the prime contractor is no longer liable to its subcontractor on the pass-through claim; and

(2) the Severin doctrine generally requires an ‘iron-bound release or contract provision immunizing the prime contractor completely from any liability to the sub.

Id. at *14 quoting E.R. Mitchell Constr. Co. v. Danzig, 175 F.3d 1369, 1370-71 (Fed.Cir. 1999)

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.