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In this fifth semiannual installment, we have packed up the
notable Contract Disputes Act claims litigation decisions coming
out of the Federal Circuit, Court of Federal Claims, Armed Services
Board of Contract Appeals, and Civilian Board of Contract Appeals
in the first half of 2022, and are ready to set out on our summer
road trip. While claims litigation can at times seem endlessly
complex, with blind spots and other obstacles at each turn, the
road to one’s recovery destination may be found through the
decisional guidebook. With this guiding principle in mind, our trip
begins with decisions that turned on jurisdictional and procedural
matters before winding our way through merits cases that
concentrate on the contractual terms. We then take a much-deserved
rest before continuing, in the second half of this summary to be
published next week, with pandemicrelated claims litigation, taking
a detour to discuss decisions about terminations and releases, and
then completing our journey with sundry practice tips. Grab your
favorite tunes, and away we go.
Danger Falling Rocks—Steer Clear of Common
Pitfalls in Claim Submission or Your Claims Journey Will Dead
End—No matter how meritorious the claim, litigants
must meet numerous procedural prerequisites before those
merits ever have hope of seeing daylight. Claims litigation is
remarkable not only for these procedural rules of the road but also
for how often defiance of those rules is outcome determinative. The
following decisions in our set are emblematic of this principle and
serve as an important reminder to dot i’s, cross t’s,
and keep your hands at the 10am and 2pm position when submitting a
CDA claim.
License and Registration to File—State a Sum Certain
and Certify the Claim: For any claim “of more than
$100,000,” the CDA requires that an individual
“authorized to bind the contractor with respect to the
claim” sign a certification that the claim is made in good
faith, the supporting data are accurate and complete to the best of
the contractor’s knowledge and belief, the amount requested
accurately reflects the contract adjustment for which the
contractor believes the Federal Government is liable, and the
certifier is authorized to act on the contractor’s behalf. 41
USCA § 7103(b). In Sungwoo E&C, Co. Ltd., ASBCA
61144, 61219, 62738, 2022 WL 1601921 (April 27, 2022), the
Government moved to dismiss an appeal because a “foreign
legal consultant,” and not a “duly authorized corporate
officer” of the company, signed the certification. The ASBCA
denied the Government’s motion and restated its rule that the
certification requirement does not prohibit lawyers—with the
power of attorney to bind the contractor—from signing
certifications (although that may not be best practice for other
reasons). The Board observed that the CDA does not require
“that the person providing the certification be an employee
of the contractor,” “have any involvement with the
administration or performance of the contract,” or
“have sufficient personal knowledge of the details of the
claim itself to respond to the government’s discovery
requests as the government argues.” Id. (citing 41 USCA
§ 7103(b)(1); Federal Acquisition Regulation 33.207(c)).
A Necessary Pitstop—Presentment: The CDA also
requires that all claims first be submitted to the contracting
officer before being appealed to a court or board. 41 USCA §
7103(a). Although the concept seems simple, in practice it is more
complicated. For instance, contractors must present to the CO all
claims involving the same operative facts at once or risk waiving
the claim as happened in Avant Assessment, LLC v. U.S., 159 Fed.
Cl. 632 (2022); 64 GC ¶ 145. As background, the contractor in
this decision submitted claims associated with a termination to the
CO, and then appealed the denial of those claims to ASBCA. On
appeal, the contractor raised additional claims related to the
termination—constructive acceptance claims and improper
rejection claims—which the ASBCA dismissed for failure to
present to the CO. Following the dismissal, the contractor then
presented those claims to the CO and appealed the CO’s
subsequent denial to the COFC. The COFC held that these claims,
which involved the same transactional facts as those before the
ASBCA, were barred by claim preclusion: “Avant may not submit
some, but not all, of its claims to the contracting officer and
proceed to piecemeal litigation of its claims through selectively
creating or limiting ASBCA’s or this Court’s
jurisdiction over its claims.” Id. at 639. Because Avant
could have presented all its termination-related claims “to
the contracting officer in its initial settlement proposals,
thereby bringing all of its claims at one time … Avant gets
no second bite at the apple in this Court.” Id.
Relatedly, contractors must alert the CO of each element of all
theories of liability pertaining to a particular claim before
proceeding with those theories on appeal. In a case discussing both
this and the sum certain requirement (discussed later in this
article), ECC Int’l, LLC, ASBCA 60167, 2022 WL
509701 (Jan. 25, 2022), the contractor submitted a certified claim
based on breach of implied warranty of specifications and breach of
the duty of good faith and fair dealing. During the appeal of a
deemed denial, the Government sought dismissal of two additional
theories of recovery that the Government argued the contractor
added for the first time on appeal: commercial impracticability and
superior knowledge. The ASBCA agreed with the Government as to the
commercial impracticability count on the ground that this theory
contains an element (the additional expense was so
substantial that performance would be commercially senseless)
that was not present in any of the other theories of recovery set
forth in the certified claim and thus never presented to the CO. By
contrast, the ASBCA denied the Government’s dismissal motion
as to the superior knowledge count because “the elements of
breach of duty to disclose superior knowledge overlap and do not
differ materially from those of the two theories of recovery
presented to the contracting officer in ECCI’s certified
claim.” To avoid even the cost of addressing such a dismissal
motion, contractors are wise to present each and every possible
theory of relief based on the same operative set of facts to the
CO. See also DLT Sols., LLC, ASBCA 63069, 2022 WL 2339045
(May 26, 2022) (dismissing superior knowledge and fraudulent
inducement theories for lack of jurisdiction because contractor
first raised these theories on appeal and did not present those
theories of liability—which involve pre-award
conduct—to the CO in its certified claim).
Notably, contractors must present their certified CDA claim to
the correct CO, i.e., the individual with authority to decide the
claim. While this is often obvious, complications can arise where
the claim involves a Federal Supply Schedule (FSS) Contract, and
the Government contract holder (the General Services
Administration) is different than the ordering agency. FAR 8.406-6
addresses which COs have authority to resolve disputes pertaining
to orders under a schedule contract and provides generally that if
the claim requires interpretation of the FSS contract, then the GSA
CO must decide the claim; while disputes related to performance of
the order may be resolved by the ordering activity CO. The ASBCA
applied this rule in DLT Solutions, LLC, ASBCA 63069, 2022
WL 2339045 (May 26, 2022) to deny the ordering agency’s
motion to dismiss for lack of jurisdiction, which argued no valid
claim existed because the contractor should have presented the
claim to the GSA CO. The Board found all pertinent issues related
to the performance of the order (i.e., whether the ordering
activity breached the Order’s Bona Fide Needs Provision by
failing to exercise the options when a bona fide need for the
software existed) and did not require interpretation of the
schedule contract.
“But Officer …” (Be Truthful):
Contractors must take great care that all CDA claims are truthful
and rely on accurate data. Lodge Constr., Inc. v. U.S.,
158 Fed. Cl. 23 (2022), provides a harsh warning to Government
contractors regarding the consequences of submitting false claims
(in fact, the introduction to the opinion expressly states that
warning). This case resulted from a construction contract plagued
with performance problems from the start. The contractor submitted
a series of CDA claims, each bearing the FAR-required certification
that the claim was made in good faith, that the supporting data are
accurate, and that the amount accurately reflects the
Government’s liability. The Government shortly terminated the
contractor for default, and the contractor appealed the claims to
the COFC. The Government asserted fraud counterclaims, alleging the
contractor included false delay costs and double-billing and
exaggerated equipment costs. After discovery and a trial, the COFC
agreed with the Government, finding the contractor knowingly
submitted false claims accompanied by false records with respect to
the type of equipment it utilized on the project, at a minimum
acted with reckless disregard for accuracy in its use of a ratio in
its billings that was not a reasonable or accurate measure of its
costs, and also knowingly or recklessly claimed costs that the
Government had already paid. The Court found the contractor
“failed to earnestly undertake the obligations of claim
certification” and cautioned:
[w]hen job cost data and recordkeeping are inaccurate, the claim
will inevitably contain errors and the line between negligence and
reckless disregard for the truth becomes vanishingly thin. Cross
it, and the Government contractor’s claim becomes fraudulent
as a matter of law … while some elements of [the
contractor’s] claims may reflect nothing more than slapdash
formulae, overwhelming evidence establishes that substantial
portions of those claims are patently deceitful.
Id. at 29.
A Need for Speed: the Statute of Limitations Defense:
The CDA requires all claims “be submitted within 6 years
after the accrual of the claim.” 41 USCA § 7103(a)(4).
This requirement applies to both contractors and the Government as
claimant. The ASBCA reminded contractors in Strategic Tech.
Inst., ASBCA 61911, 22-1 BCA ¶ 38,027, of the importance
of documenting submissions to the Government and retaining that
documentation in order to be able to assert this defense against
untimely Government claims. In this case, the
Government asserted a claim disallowing costs in an incurred
cost proposal (ICP) more than six years after the alleged
submission. However, the contractor was unable to prove it timely
submitted its ICP and therefore lost the benefit of its statute of
limitations defense. The contractor testified it had directed an
employee (who no longer worked at the company) to load the relevant
documents onto discs and to submit them to the Government via UPS
or FedEx, but retained no documentation of it occurring. By
contrast, the Government consistently maintained systems for
logging incoming submissions and testified to the absence of any
record of having received the ICP until it later obtained it via
audit.
The statute of limitations runs from the time the basis of a
claim is known or should have been known, not from contract close
out. The contractor made this fatal mistake in Herren Assocs.,
Inc., ASBCA 62706, 2022 WL 1601930 (March 29, 2022), asserting
that because its contract provided for interim invoicing with a
final true-up payment accounting for actual costs incurred, the
contractor need not have submitted any claims related to increased
costs encountered in performance until six years after this final
payment. The Board rejected this contention, finding the
claims—some of which were submitted more than a decade after
the contractor should have known of them—untimely and
reasoned that the contract’s final payment clause contained
no language that would toll the time for requesting an increase in
final payment.
The ASBCA confirmed in Lockheed Martin Aeronautics Co.,
ASBCA 62209, 22-1 BCA ¶ 38,112, that, where the claim for
adjustment had multiple accrual dates that correspond to each
Governmentapproved Material Deficiency Report (MDR) ordering the
contractor to perform extra work, the continuing claims doctrine
can preserve jurisdiction of the claim for those Government orders
that fall within the statutory six-year period. Lockheed filed a
claim in October 2018 seeking amounts for an alleged constructive
change to its contract. The Air Force argued the claim was untimely
because it was apparent to Lockheed the work was taking longer than
expected before October 2012. The Board applied the continuing
claim doctrine to find that Lockheed could not have filed its claim
until the Government authorized additional work, which the
Government did on multiple separate dates. Claims based on
Government authorizations after October 2012 were timely. The
ASBCA notably rejected the Air Force’s argument that the
continuing claim doctrine requires “specifically identifiable
damages” for each claim event, distinguishing that asserted
standard from precedent requiring that each event or wrong have
“its own associated damages.” The Board explained:
“[i]nsofar as the Government’s contentions here, our
determination that [Lockheed’s] claim arose from multiple
events is not defeated even if appellant ‘cannot even
identify a single hour of the 428,482 claimed “production
hours” allegedly caused by any identifiable MDR and the
number of O&A hours related thereto.’ ”
Lastly, in AAI Corp., d/b/a Textron Sys., Unmanned
Sys., ASBCA 61195, 61356, 2022 WL 1154833 (March 23, 2022), the
contractor sought to dismiss a multi-ground defective pricing claim
by the Government based on a statute of limitations defense. Before
applying the statute of limitations to each Government allegation,
the Board recognized that no bright line rule exists in defective
pricing cases that the limitation period begins to run on the date
the parties execute the contract. Turning to the first ground,
relating to an undisclosed subcontractor bid, the Board found it
timely, because there was no evidence the Government ever knew of
the existence of the undisclosed bid until the time of its audit
many years later. Conversely, the Board found time barred the
second Government ground, based on duplication of shelter costs
that was apparent from the face of the contractor’s proposal.
The Board noted that while the cost duplication “might not
have jumped off the pages on a first read,” the Government
“had six years to scrutinize it more closely,” and
“[c]laim accrual is not suspended simply because the
Government failed to appreciate the significance of what the
contractor furnished.” As with the first ground, the third,
relating to labor hours on another project sent to the Government
in monthly reports and analyzed by the contractor in relation to
this contract, was timely. The Board explained “there is a
great difference in the degree of effort required to uncover the
defective pricing” associated with these reports compared to
the duplicative costs contained in the actual proposal. The Board
said that the statute requires
contractors to certify their data and submit it to the
contracting officer …. There would be no point in such a
requirement if the CO were not entitled to rely on it. If the
Board were to rule that the government must conduct a forensic
examination of years of data at the time of bid notwithstanding the
certification, it would defeat the purpose of the
certification.
No U-Turns; If You Miss the Appeal Deadline, You Cannot Turn
Back: The CDA requires contractors to appeal a final decision
to the ASBCA or CBCA within 90 days or to the COFC within one year.
41 USCA § 7104. The ASBCA confirmed in Zahra Rose Constr.
& Logistics Servs. Co., ASBCA 63221, 2022 WL 2116305 (May 19,
2022), that even when a final decision may contain defects (such as
failure to advise the contractor of its appeal rights), a
contractor must demonstrate the particular defect prejudiced its
ability to timely file its appeal within 90 days of receipt in
order to be excused from a timely appeal. On the record on which
the Board dismissed the appeal, the contractor could not and did
not argue that the final decision’s omission of the
contractor’s right to appeal nor the agency’s failure
to transmit the CO’s decision by a method that provides
evidence of receipt, forgave the more than 90-day notice of appeal.
Instead, the contractor alleged that it could not timely notice its
appeal due to the Taliban takeover of Afghanistan. Although the
Board observed that “these highly unusual circumstances might
warrant further consideration,” the contractor’s
activity in another appeal before the ASBCA evidenced that the
contractor was regularly communicating with the Board and had the
ability to conduct business before the Board during the 90-day
appeal period.
The CBCA issued another cautionary tale in Eagle Peak Rock
& Paving, Inc. v. Dep’t of Transp., CBCA 5955, 22-1
BCA ¶ 38,100, holding it does not matter who at the company
received the final decision; if it was received, the 90-day
timeline for submitting an appeal is running. In this case, the
contractor’s office was closed the Friday before the Labor
Day long weekend (September 1st). The only person in the office was
a receptionist, who accepted a FedEx delivery containing a
CO’s final decision. The company asserted it did not receive
the final decision until the Tuesday after Labor Day (September
5th), and appealed that decision on December 1st. The CBCA held the
appeal untimely because the FedEx receipt showing the receptionist
signed for the package, although she may not have been authorized
to do so, was “objective evidence of receipt,”
rendering November 30th the 90-day appeal deadline.
Look Both Ways—an Important Part of the Claims
Journey Is Reading and Understanding the
Contract—Once a dispute exists, it is remarkable how
often it is resolved by the plain terms of the contract.
Reserved Parking—Only Those with a Procurement
Contract with the Government Can Be in the “Driver’s
Seat” to Assert the CDA Claim: In Avue Techs. Corp. v.
Dep’t of Health & Human Servs. & Gen. Servs.
Admin., CBCA 6360, 6627, 22-1 BCA ¶ 38,024; 64 GC ¶
34, the CBCA held it lacked jurisdiction over a software
company’s claim that the Government breached its license
agreement because that agreement was not a procurement contract
under the CDA. Instead, the procurement contract was the contract
between the software reseller and the Government; that contract
incorporated the software licensing agreement by reference but gave
the software company no right to submit its own claim under the
CDA. The Board cited Federal Circuit precedent for the holding that
a “ ‘procurement contract’ subject to the CDA
must be a contract for ‘the acquisition by purchase, lease or
barter, of property or services for the direct benefit or
use of the Federal Government.’ ” Avue Techs.
Corp. v. HHS & GSA, CBCA 6360, 20-1 BCA ¶ 37,503
(quoting New Era Constr. v. U.S., 890 F.2d 1152, 1157 (Fed. Cir.
1989)). The Government here agreed to purchase the software through
a purchase order with a reseller that held a GSA schedule contract,
not directly from Avue under its licensing agreement. This decision
makes clear that, to obtain relief for license agreement breaches,
similarly situated software licensors must either submit a
“pass-through” CDA claim, sponsored by its reseller
with a Government contract, or pursue a copyright infringement
action in the COFC under the Tucker Act, 28 USCA § 1491.
Flashing Yellow—Promises to Discuss Changes Are Not a
Change: The ASBCA refused to reform a contract to increase
prices due to underbidding in Cooper/Ports Am., LLC, ASBCA
61349, 22-1 BCA ¶ 38,065. In this case, the claimant had
purchased an unprofitable contract, but the CO for that contract
had stated he would “work with” the claimant on the
contract’s pricing moving forward. The claimant then brought
a claim for reformation of the pricing terms stated in the
contract, which the Board denied, holding that a promise to
consider changing a contract’s price is not enforceable, as
it is “too vague, indefinite, uncertain, and lacking clarity
as to all essential terms to constitute a binding promise.”
The Board also explained that it only reforms contracts to reflect
the parties’ true intent, and the Government’s alleged
promise to “merely discuss” a price change did not mean
the Government actually intended to do so.
Two-Way Street—the Government Likewise Cannot Avoid
the Contractual Terms When It Fails to Modify the Contract: In
Aspen Consulting, LLC v. Sec’y of the Army, 25 F.4th
1012 (Fed Cir. 2022); 64 GC ¶ 56, the Federal Circuit
considered a contractor’s appeal of a decision denying a
breach of contract claim seeking compensation related to the
Government’s failure to deposit payments in the account
designated in the contract. The contract at issue involved
construction performed in Germany that stated the Government was to
make payments to the contractor’s U.S. bank account. The
contractor’s chief operating officer (COO) in Germany
requested that future payments be made to an account he opened
there, purportedly for convenience. The Government made two such
payments, and the contractor submitted a claim for payment for the
misdirected amounts (which apparently were not routed by the COO).
The ASBCA denied the appeal, finding that the Government did not
breach by failing to pay the bank account listed in the contract
and that the COO had apparent authority to change the
contractor’s payment instructions. The Federal Circuit
reversed, finding the contract unambiguously stated that payment
“shall” be made to the U.S. account listed. While the
COO may have had apparent authority to consent to a contract
change, no such contract modification was ever made.
Merging Traffic—Assess When the Contract Incorporates
Other Terms by Reference: In CSI Aviation, Inc. v. Dep’t of
Homeland Sec., Gen. Servs. Admin., 31 F.4th 1349 (Fed. Cir.
2022); 64 GC ¶ 127, the Federal Circuit reversed the
Board’s denial of a contractor’s claim, which depended
on the contractor’s standard terms and conditions being
incorporated by reference into its FSS contract. Whereas the CBCA
found the contract’s scattered references to the
contractor’s terms and conditions ambiguous as to whether the
parties sought to incorporate them by reference, the Federal
Circuit found the contract “uses sufficiently clear
and express language to establish the identity of the document
being referenced and to incorporate the CSI Terms and Conditions
into the Schedule Contract by reference.” Id. at 1355. The
Federal Circuit observed that its precedent does not require
“magic words” to effectuate incorporation by reference,
and disagreed with the Board’s reasons for finding the
language ambiguous, reasoning that the Board’s alternative
interpretation was not reasonable and any question about the
version of the terms being referenced was “not relevant to
deciding the question before us: whether any version was
incorporated into the contract by reference.” Id. at
1357.
“Right Lane Must Right Left”—What to Do
When the Contract Is Ambiguous?: Two cases so far this year
addressing patent ambiguities reached diametrically opposite
results, wholly due to how the contractor responded to that
ambiguity. First, in Lebolo-Watts Constructors 01 JV, LLC v.
Sec’y of the Army, 2022 WL 499850 (Fed. Cir. Feb. 18,
2022), the Federal Circuit addressed a patent ambiguity where the
contractor did not inquire as to whether the construction of two
circuit breakers was included in the contract’s scope of
work. The Court affirmed the ASBCA’s denial of the claim,
agreeing that any ambiguity regarding whether the contractor was
expected to provide these breakers was at best patent. On the
whole, the Circuit tended to agree with the Government’s view
that the circuit breakers were clearly included in the statement of
work, but the Court found some evidence in the contract supporting
the contractor’s interpretation. Because the ambiguity with
respect to the obligation to provide breakers was patent, the law
required the contractor to inquire about it, and the
contractor’s failure to do so “was properly construed
against” the contractor. Id. at *5.
Conversely, the contractor did so inquire in ECC
Int’l, LLC, ASBCA 58993, 60167, 60283, 22-1 BCA ¶
38,073, submitting a question regarding the presence of collapsible
soil at a construction site. The Government responded, “Bid
it as you see it.” The contractor included in its price
proposal its interpretation that the solicitation excluded
collapsible soils mitigation. When there turned out to be
collapsible soil and the Government directed the contractor to
perform the work, the contractor submitted a claim. The Board found
no differing site condition because the contract included the
possibility of collapsible soil. Nevertheless, the
Board agreed that the contract did not include the work to
mitigate collapsible soils given the Government’s acceptance
of the qualified proposal “constituted its acquiescence to
ECCI’s clearly expressed interpretation of a solicitation
ambiguity created by the government.” The Government’s
demand that the contractor perform this work after refusing to
clarify the scope of the contract pre-award constituted a
compensable contract change. Of note, the Board observed that the
Government had created the ambiguity and in response to bidder
questions, invited the offerors to propose their own solutions, and
thus was bound by the contractor’s “reasonable and
clear pre-award, pre-dispute interpretation.” “Whether
by acquiescence or negligence, the Government accepted ECCI’s
qualification when it awarded the contract without
discussions.” See also Gen. Dynamics – Nat’l
Steel and Shipbuilding Co., ASBCA 61524, 22-1 BCA ¶
38,067 (construing ambiguity against the contractor because
evidence showed that, when preparing its bid, the contractor was on
notice that its subcontractors interpreted the scope of work
differently than it did but the contractor failed to inquire about
the ambiguity before submitting its proposal).
* * *
To avoid over-tiring our readers and fellow travelers, we now
exit into the nearest camp site before continuing our claims
journey. Please pitch a tent, enjoy some s’mores, and join us
for the second half of our road trip to be published next week.
Originally published by The Government Contractor
The content of this article is intended to provide a general
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