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CLAIMS (IN GOVERNMENT CONTRACTS)

Posted By Tom Petruska, Monday, February 21, 2011

            No Contractor anticipates filing a claim against their customer, the government, when they are awarded a new contract.  Unfortunately, disagreements between the parties will occur.  When such disputes relate to government contracts, except for maritime contracts, the resolution process is described in the Contract Disputes Act of 1978 ("CDA”).[1]  At the Federal Aviation Administration, disputes are covered by a separate statute at the Office of Dispute Resolution and Appeals ("ODRA”).  The CDA applies to express or implied contracts with executive agencies that are for the procurement of property (except real property), services, construction, or disposal of personal property.  Generally, the CDA is applicable only to contracts that arise from standard government procurement and expenditure of appropriated funds.  The substance of a claim will determine whether the CDA applies.

            The right to file an appeal to an adverse decision is limited to "a party to a government contract” on a claim "related to a contract.”[2]  A "contractor” is a party to a government contract whether an express or implied contract.

            The CDA requires that a pre-existing dispute exist except for routine requests for payment.  There must be a dispute before a CDA action can be invoked; otherwise there is no basis for a claim. 

            A claim must be submitted to the Contracting Officer in writing asserting, as a matter of right, a sum certain or an adjustment or interpretation of contract terms, or other relief.[3]  The claim must be submitted to the Contracting Officer within six (6) years of the "trigger” event.[4]

            Within these general rules, there are some defining requirements that claimants should be attentive to.  A claim under $100,000 is not required to be certified; all claims over $100,000 must be certified.  A claimant is entitled to interest on successful claims.  The claims must request a final decision from the Contracting Officer, and it must include sufficient documentation to permit a decision without additional investigation.  Of course, any fraud will be held against the claimant.

            Three decisions recently discussed claims and provide useful information. 

1.       In the Appeal of Sygnetics, Inc.  before the Armed Service Board of Contract Appeals ("ASBCA”), ASBCA No. 56806, dated October 12, 2010, Appellant appeals the final decision by a Contracting Officer denying a claim of $246,382.16.  Sygnetics submitted an uncertified claim by certified mail.  Sygentics also sent an e-mail with an unexecuted claim to the government.  Appellant produced a receipt from the USPS but it was not date stamped.  The government was unable to produce any copy of the certified claim as required by regulation.[5]  Furthermore, Sygentics was unable to produce any signed receipt of the claim by the Army.  Absent a stamped receipt by the U.S. Postal Service, or the receipt by the Army of a certified claim, the ASBCA denied the Appellant appeal.

All claims must be in writing and submitted to the CO for a decision.[6]  If the claim exceeds $100,000, then it must be certified.[7]  Therefore, evidentiary proof of these requirements is essential.  Always obtain the stamped receipt or other evidence from the carrier, and obtain a receipt by the government.

2.      In the case of System Planning Corporation ("SPC”) v. United States in the United States Court of Federal Claims, No. 07-678c decided on October 6, 2010, SPC had filed a claim under the CDA with the Air Force Contracting Officer on or about October 9, 2000.  After waiting for a decision for nearly seven (7) years, SPC appealed a deemed denial on September 18, 2007,[8] to the Court of Federal Claims.  A contractor can request or obtain "relief only when the appeal or action is based on a qualifying claim filed by the contractor and a final decision by the contracting officer.”[9]

The contracting officer is required by law to issue a decision within sixty days of receipt of a certified claim over $100,000 or notify the contractor when a decision will be issued.[10]  Any failure by the contracting officer to issue a decision on a contract claim within the period required will be deemed to be a decision by the contracting officer denying the claim and will authorize commencement of the appeal or suit on the claim.[11]  The claimant has six (6) years to file a claim under the CDA from the date the adverse action occurred.  Once the claim is filed, the claimant has strict time limitations to file an appeal.  Under a "deemed denial,” however, when the CO fails to issue a decision,[12] the six year time limitation is not applicable to contractors under the CDA for waiting to appeal or not to appeal.  Furthermore, the six year statute of limitations in the Tucker Act[13]  is not applicable to CDA actions and appeals.

While SPC waited nearly seven years to file their appeal Contracts Unlimited strongly urges readers to file an appeal of a deemed denial within 90 days of the final date the CO must issue a decision.

3.      In the case of L.A. Ruiz Associates, Inc. v. The United States, Case No. 09-211C, filed on September 23, 2010, Ruiz built an annex to a USPS Carrier facility in Revere, Mass.  Occupancy commenced on April 7, 2001.  Seven (7) years later, on April 8, 2008, the Contracting Officer at the USPS filed a claim against Ruiz for $1,131,166.  One year later, on April 7-8, 2009, Ruiz counterclaimed for breach of contract and unpaid costs by sending a claim letter to the Contracting Officer.

The CDA requires "all claims by a contractor against the government relating to a contract shall be in writing and submitted to the contracting officer for a decision.”[14]  The Court stated that "the CDA requires a clear and unequivocal statement that gives the contracting officer notice of the loses and amount of the claim.”[15]  The Court explained that the letter from Ruiz (1) was not addressed to the contracting officer; (2) did not ask for a final decision; (3) was not submitted to, or received by, the contracting officer because there was no evidence of receipt; (4) failed to state a sum certain or establish any entitlement to relief[16] (and general statements reserving rights to file claims in the future, are not acceptable); and (5) Ruiz failed to prove that the contracting officer issued a final decision regarding its claims; before the claimant can argue its claim is "deemed denied” it must prove it was physically received by the contracting officer.

Hence, the Court denied the claim and potentially cost Ruiz a substantial amount of money long after the profits from the job with the USPS had been spent.

The moral of the stories is that you must follow the rules, regarding preparing and submitting claims exactly as they are listed in the CDA and the FAR.  Failing to follow the rules will probably result in rejection of the claim by the Contracting Officer and the courts and incur additional costs needlessly. 

The rules for proper claims are strictly enforced by the agencies and the Courts.  There is very little opportunity for error and still obtain a valid claim response.  Take the time to prepare and submit the claim correctly and properly.  A little extra caution when developing the claim may save you significant extra expenses later.

 

Tom Petruska

Contracts Unlimited, Inc.

The foregoing is not a legal opinion or legal advice.  Consult your attorney for legal assistance.

 

 

 



[1] 41 U.S.C. 601-609. Also, see FAR 33.2

[2] Id

[3] FAR 2.101; FAR 33.201

[4] 41 U.S.C. 605(a)

[5] FAR 33.207

[6] 41 U.S.C. 605(a)

[7] FAR 33.207

[8] 41 U.S.C. 605(c)(5) and 609(a)(1)

[9] Alliant Techsystems, Inc. v. United States, 178 F.3d 1260 (Fed. Gr 1999)

[10] 41 U.S.C. 605(c)(2)

[11] 41 U.S.C. 605(c)(5)

[12] 41 U.S.C. 609(a)(3)

[13] 28 U.S.C. 2501

[14] 41 U.S.C. 605(a)

[15] Citing Contract Cleaning Maint., Inc. v. United States 811 F.2d 586, 592 (Fed. Cir. 1987)

[16] 41 U. S.C. 605(a)

Tags:  Claims  Contracts Unlimited 

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