Chapter 11
Claims
The Difference between an REA and a Claim
How Is a Claim Raised and Resolved?
How Does a Contractor File a Claim?
How Does the Contracting Officer Handle the Claim?
The Statute of Limitations for Filing Claims with the Contracting Officer
The Statute of Limitations for Appealing a Contracting Officer’s Final Decision
We know from previous chapters that there are two kinds of fights that the government and vendors can get into: protests and claims. Protests are fights by unsuccessful vendors trying to get the contract. Claims are typically fights by contractors trying to avoid a termination for default or contractors trying to get the contracting officer to do something such as pay more money or interpret ambiguous contract wording. Claims such as a contracting officer’s demand for liquidated damages can come from the government as well. Because government claims are relatively rare, in this chapter we will discuss claims by assuming they are contractor claims.
Although this chapter examines the fights the contracting officer and the contractor get into, it’s important to mention arbitration. The Disputes Clause, FAR 52.233-1 at clause (g), allows the contractor and the government to agree to alternative dispute resolution (ADR). ADR can be very effective in quickly resolving disputes between the contractor and the government.
What is ADR? It can be many things that cannot be neatly described in twenty-five words or less. Basically, it is an attempt to keep a dispute out of the courtroom by placing it into the conference room. In the nongovernment contracting world, ADR includes alternatives such as Judge Judy. In the government contracting world, ADR could be binding arbitration by a judge from the COFC or a board; minitrials where each side gets the chance to informally present its case to the judge, at which time an advisory or binding decision is made by the judge; or a meeting with a judge and the parties involved to discuss the strengths and weaknesses of their case. The Court of Federal Claims (COFC) and boards use various forms of ADR.
When filing claims, contractors have a choice of going to the Court of Federal Claims (COFC) or a board of contract appeals (BCA). Both forums have become quite good at handling government contract issues, and each retains its independence. The court is not bound by precedents from the boards; nor are boards bound by court precedents.
A government employee working as a credit union examiner for the National Credit Union Administration sued the government in the Court of Federal Claims (COFC) for overtime pay. The court concluded that he was not entitled to overtime pay for several reasons, including the fact that the claims were too late, that he was exempt from overtime, and that he had never gotten the okay for overtime from his boss. After losing, he came back to the COFC asking it to reconsider its decision, citing precedent decisions from the General Services Board of Contract Appeals (GSBCA). In refusing to reconsider the case, the court explained the role that board precedents play in resolving issues before the court. “Although opinions of the GSBCA are persuasive authority, they do not bind this court.” It also cited court precedents calling the Government Accountability Office and the Armed Services Board of Contract Appeals decisions persuasive but not controlling and “not accorded stare decisis effect.” The court went on to describe the reason for its independence: “It is the duty of this court to apply the statutes and regulations to the facts of the case. This court is not bound by GSBCA’s approach to the evaluation of personal convenience travel expense claims. Even if the GSBCA takes an inconsistent approach to personal convenience travel expense claims, that circumstance would have no bearing on the decisions of this court.”1
One way of looking at claims is with a who, what, when, where, why, and how approach. In chapter 9, we discussed three aspects of claims before the COFC and the agency BCAs: the “where,” in terms of jurisdiction; the “who,” in terms of contractors finding standing; and the “why,” in terms of relief available there. In this chapter, we will look at the “what,” “when,” and “how” of claims.
In this manner we will look at claims from the perspective of a contractor filing claims against the government. This ignores—but only for purposes of simplicity—the fact that the contracting officer can file government claims against the contractor. Since contractor claims are much more common than government claims, we will focus on the more common types of claims—contractor claims.
WHAT IS A “CLAIM”?
A claim is a term of art. It means something very precise and very specific in government contracting. Before something is a claim, the government has no deadline to answer. And before something is a claim, a contractor does not get interest if its claim turns out to be successful. So the fuss over a claim has to do with deadlines and interest. The government must respond to a claim within sixty days. A claim also earns a contractor interest.
Interest can add up. It is paid even on claim amounts not yet paid.
The government entered into a lease for space occupied by the Environment Protection Agency. The monthly rent was approximately $66,000. When the government did not move out on time, the landlord immediately filed a claim for the past-due rent, at that time just $66,000 for one month. In 2005 the COFC concluded that several months’ back rent was due, a total of over $264,000. The successful landlord got interest under the Contract Disputes Act. That law says successful claims are entitled to interest on the amount of the award. And interest starts to run on the date the claim is received by the contracting officer. “This date is fixed by statute, and applies to the total costs embodied in the claim to the Contracting Officer, even if some of the costs have not yet been incurred by the contractor. Although this statutory imperative may lead to incongruous results, as in this case, where interest begins to run on rent that is ultimately found owing even before some of that rent is actually due, the statutory scheme is intended to promote prompt submission and resolution of claims. It is not the role of this court to tinker with the rule.”2
With time and money at stake, you’d think Congress would have made it easy for the government and contractors to easily spot a claim by defining “claim” in the Contract Disputes Act (CDA). But that has not happened despite the fact that FAR 2.101’s definition of “claim” requires only a few formalities to consider a contractor’s letter to a contracting officer a claim.
Complicating things further, the courts and the boards have followed Congress’s laid-back approach to claims by reinforcing the principle that a formal claim has only the barest of essentials.
No particular language is required to create a claim as long as the contractor submits to the contracting officer a “clear and unequivocal statement” providing adequate notice of the basis and amount of the claim.3
But this creates a terrible problem: if “no particular language” creates a claim that starts the contracting officer’s deadline clock and the contractor’s interest clock, how does anybody know when those clocks start?
The best way to know whether something is a claim is to look at the process from start to finish and distinguish a request for equitable adjustment (REA) from a claim.
The Difference between an REA and a Claim
It is important to distinguish an REA from a claim.
An REA from a contractor does not earn interest. Nor does it start a contracting officer’s clock. Although a contracting officer must respond to an REA, there is no formal claims clock timing interest accrual. To understand claims, you have to understand the overall process. It often starts with a phone call.
1. The contractor’s phone call. The equitable adjustment process often begins with a phone call from the contractor to the contracting officer, letting the contracting officer know that there is a problem with the contract. This phone call, we will see, cannot be a claim. But it is a helpful part of the process because the phone call gives the contracting officer notice that something needs attention.
2. The contractor’s follow-up letter. The contractor usually follows up the phone call with the follow-up letter. The wise contracting officer will attempt to control the equitable adjustment process as much as possible by asking the contractor to send him a letter describing the issue raised in the phone call in as much detail as possible and asking for the estimate required for the contractor to fix the problem. The contractor’s letter is typically labeled a request for an equitable adjustment, or REA. The contractor could make this letter a formal claim but typically does not for good reasons. If a contractor makes the letter a claim, the litigious claims process begins and sends the wrong message to the contracting officer, forcing the contracting officer to get the agency’s lawyers involved. Making this letter a claim, though legally possible, gets the equitable adjustment process off to a bad start. Usually, the contractor’s letter is an REA.
3. The contracting officer’s investigation. Since the contracting officer now is on notice that there is a problem with the contract, the contracting officer looks into it, often by consulting with the contracting officer’s technical representative.
4. Negotiations between the parties. If the contracting officer believes that there should be a change in the project as a result of the contractor’s call and letter, the contracting officer can try to negotiate a resolution of the problem. Sometimes the parties will negotiate the amount of money needed to resolve the issue. If the contractor is satisfied with the contracting officer’s response at this time, both parties modify the contract, and no formal claim ever arises. The REA process ends and the claims process never begins.
5. The formal claim. If a contractor is not satisfied with the contracting officer’s resolution of the problem, the contractor now enters the claim stage. Typically, the contractor writes another letter that describes the problem again to the contracting officer, and includes the contractor’s proposed resolution. The contractor certifies the claim if it’s over $100,000 and demands a final decision from the contracting officer on the claim. Now the claims process has begun. Interest on the claim is running, and the contracting officer’s sixty-day clock is also running.
The Definition of a Claim
FAR 2.101 defines a claim as follows:
“Claim” 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 the contract. However, a written demand or written assertion by the contractor seeking the payment of money exceeding $100,000 is not a claim under the Contract Disputes Act of 1978 until certified as required by the Act. A voucher, invoice, or other routine request for payment that is not in dispute when submitted is not a claim. The submission may be converted to a claim, by written notice to the contracting officer as provided in 33.206(a), if it is disputed either as to liability or amount or is not acted upon in a reasonable time.
HOW IS A CLAIM RAISED AND RESOLVED?
The “how” of a claim has two perspectives: the perspective of a contractor filing the claim and the perspective of a contracting officer resolving the claim.
How Does a Contractor File a Claim?
How a contractor files a claim depends on what the contractor is asking for—money, a contract interpretation, or “other relief.”
Claims for Money
A claim for money has three or, if over $100,000, four t imple elements.
1. A sum certain. To make a claim for money, a contractor must demand a specific dollar amount from the government. There can be no claim if a contractor simply tells the contracting officer vague things like “the contractor demands fair compensation for this” or makes other demands that lack a specified dollar amount.
Congress demanded that a contractor give a “sum certain” for several good reasons. It did not want a contracting officer to settle claims based on estimates.
The legislative history shows the purpose to be so that government representatives can readily examine and evaluate contractor claims. Otherwise, there’s no sound basis for evaluation, negotiation or legal claim settlement.4
Another rationale is that the certification of claims over $100,000 is designed to encourage contractors to submit claims with good numbers in them. The use of estimates or other fuzzy language in place of a sum certain would make the certification meaningless.
But Congress’s approach sometimes presents problems. One of the problems with determining a sum certain at the beginning of a claim is that further review of a claim might well lead to an increase in the claimed amount. Therefore contractors are sometimes hesitant to give an unequivocal dollar amount as part of the claim. Instead, they use words that give them room to increase the claimed amount. One way contractors do so is to use phrases such as “at least” or “well over” a specific dollar amount. These fuzzy words do not create a valid claim.
Eaton Contract Services filed a claim against the U.S. Army Corps of Engineers for consequential damages “well over $2 million.” The ASBCA denied the claim, concluding that the language used by the contractor on the consequential damage element, “well over $2 million,” did not set a sum certain as required by Congress. The board gave a couple of examples of language considered equivocal and not stating a sum certain. For example, claims for “in excess of” a particular amount did not satisfy the sum certain requirement. Nor did the phrase “an unspecified amount anticipated to be in excess of” a particular dollar amount establish a claim.5
2. Specific demand for a contracting officer’s final decision. The contractor must demand—expressly or implicitly—a final decision of the contracting officer.
3. State the basis of the claim. The contractor must tell the contracting officer the rationale for filing the claim. For example, it could be having to do extra work without additional pay, encountering a differing site condition without getting any additional money, being delayed by the government, or having the government make the contractor responsible for warranty work when the damage is not the contractor’s fault.
The claim may include documentation that helps the contractor’s case. Typically, this would include invoices or canceled checks showing that the contractor actually spent the money the contractor is now requesting from the government.
4. Certification. If the money demanded is for more than $100,000, the contractor must certify the claim. The exact magic words a contractor must use are stated in the Disputes clause in the contract.
Claims for Interpretation of Contract Terms
When the contract tells a contractor nothing more than that it must “stock the restroom,” does that mean one-ply or two-ply toilet paper? In an actual case, all the building maintenance contract said about bathroom supplies was that the contractor had to “stock the rest-room.” The government wanted the best—two-ply toilet paper. The contractor client wanted to give the government the cheapest—one-ply toilet paper. A claim over contract interpretation was needed to resolve this “constitutional” issue.
Every contract is full of similar language problems that must be resolved. Anytime the contractor says the contract means one thing and the government says it means another, there is the possibility of a claim over contract interpretation.
And although these issues will involve money down the road, they do not involve money right now, so a claim for money is not yet appropriate. Alternatively, the contractor could provide the two-ply and file a claim for the additional cost. The immediate issue, however, is “what does it mean?” That makes it a claim involving the interpretation of contract terms.
The contractor can file a claim that forces the government to give a formal answer to any contract interpretation issue. And it’s much easier than money claims. There is no need to provide backup or invoices as in a money claim. Nor is there any need to certify the claim.
How does a contractor file a legally sufficient claim over a contract interpretation issue? It’s simple. The contractor sends the government a letter describing the controversy: what the contractor thinks the contractor language means and what the government has told the contractor that it thinks it means (if the government has done so). The contractor ends by demanding a formal decision of the contracting officer on the issue.
In some cases, a valid claim for a contract interpretation can be indirect and can be found by combining several letters.
Clearwater Constructors Inc. had a contract with the U.S. Army Corps of Engineers to build a hangar at Grand Forks Air Force Base in North Dakota. The hangar work was subcontracted to Fleming Steel Company. The parties argued over whether the contract required explosion-proof doors. After the government said it did, Clearwater disagreed, sending the government a letter saying that the government’s requiring explosion-proof doors was “a change in scope and should be covered by a contract modification.” Attached to the contractor’s letter was a letter from Fleming arguing that the hangar doors at issue were not in hazardous area and therefore did not have to be explosion-proof. The court concluded that the two letters Clearwater had sent to the government (its letter to the contracting officer accompanied by Fleming’s letter to Clearwater) established this necessary element. Fleming’s letter to Clearwater had said the doors did not have to be explosion-proof. Its letter also told Clear-water that it wanted to be reimbursed for the explosion-proof doors. Clearwater’s letter to the contracting officer said that the change in scope should be covered by a contract modification. “In sum, Fleming and Clearwater clearly offered a precise and well explained rationale, founded both upon the facts of this matter and the language of the contract and contract modifications, setting forth the reasons for its interpretation of the contract.”6
Claims for “Other Relief”
What is this catchall “other relief”? Typically, it is a claim involving a termination for default. When a contractor asks the government to reconsider its termination because there was an excusable delay, such as the government’s slowing the project down, that’s a claim for “other relief.” Asking the government to reduce or eliminate the assessment of liquidated damages could be “other relief.” Or “other relief” could be a request that the contracting officer change the past performance evaluation it gave a contractor at the end of a contract.
Another example of the COFC proper “declaratory judgment” authority involves a contractor’s dispute with the government over the government’s written evaluation of the contractor’s performance under FAR 42.1503.
Todd Construction Co. had a construction contract for roof repairs on government buildings. The work, however, was not completed on time due to delays allegedly caused in part by Todd’s subcontractors as well as allegedly by the government. The contract included a clause requiring the government to evaluate the contract’s performance of the work after the project was completed. The clause required the report to be prepared “in accordance with agency procedures” and that “each performance report shall be reviewed to ensure that it is accurate and fair.” After the project was over, the government gave the contractor a negative performance evaluation. The contractor responded by filing a claim to the contracting officer arguing that the government’s evaluation process failed to follow FAR and agency procedures. After the contracting officer issued a final decision denying the claim, Todd appealed to the COFC and eventually to the CAFC. Both concluded that Todd had submitted a “claim” over which the COFC had jurisdiction.
In looking at the legislative history of the Contract Disputes Act (CDA) as well as the definition of a claim in FAR, the appeals court concluded that the concept of a claim included a broad scope of actions. When Congress passed amendments to the CDA in 1992, a member of Congress stated that the Court of Federal Claims could hear appeals of “all contracting officer’s final decisions.” In addition, the FAR definition of “claim” itself is broad. That definition establishes that a claim can involve “other relief arising under or relating to the contract.” According to precedent, a claim “relating to a contract” means a claim “must have some relationship to the terms or performance of a government contract.” In this case, those evaluations “have a direct connection and association with Todd’s government contracts” and, therefore, relate to the contract justifying the COFC’s jurisdiction over Todd’s claim for declaratory relief.7
A claim for “other relief” can be made simply by sending the government a letter describing what happened to the contractor and why the contractor wants relief. As in a claim for contract interpretation, a claim for other relief does not need any certifications.
The U.S. Army Corps of Engineers did not evaluate the performance of Record Steel and Construction, Inc., as well as the contractor wanted it to. So the contractor filed a claim requesting that the Army’s evaluation of its performance be corrected. The COFC said the contractor’s request was a claim. The contractor’s letter asking for reevaluation of its performance was a claim. “By doing so, Record Steel was seeking relief relating to the contract pursuant to a claim of right. Specifically, under the FAR, a contracting agency is required to prepare performance evaluations for each construction contract of at least $500,000.” Here, the agency did a performance evaluation and sent it to the contractor. In its response, the contractor disagreed with the evaluation and asked for some changes. The government refused to make those changes. The government’s denial “meant that the agency had issued its final agency action. . . . Record Steel had sought reconsideration of the Corps’s evaluation of performance under the contract, and the contracting officer[‘]s representative had denied reconsideration, rendering the evaluation a final action.”8
It’s interesting to note that the ASBCA reached the opposite con-clusion.9
How Does the Contracting Officer Handle the Claim?
When a claim demands that the contracting officer issue the contracting officer’s final decision, that decision must be the decision of the contracting officer and not of someone else in the government.
Content of the Contracting Officer’s Final Decision
FAR 33.211(a)(4) gives a good description of what a contracting officer’s final decision should look like. The contracting officer has to:
Prepare a written decision that shall include a—
(i) Description of the claim or dispute;
(ii) Reference to the pertinent contract terms;
(iii) Statement of the factual areas of agreement and disagreement;
(iv) Statement of the contracting officer’s decision, with supporting rationale; . . .
That same section provides a boilerplate advising the contractor of appeal rights.
One problem with the contracting officer’s final decision is that sometimes a contracting officer refuses to issue one. One good reason for not issuing a final decision is that the contractor has not formally filed a claim which would be entitled to such a decision.
One bad reason for failing to issue a contracting officer’s final decision is that a contracting officer wants to keep a contractor from going to court or to a board. Apparently, some contracting officers believe that if they don’t issue a final decision, the contractor cannot go over their heads to the COFC or BCA.
Congress anticipated this problem and provided for “a deemed denial.” If a contracting officer doesn’t honor the sixty-day deadline, a contractor can deem its claim denied and go to the court or board anyway. If a contractor does not get an answer by the deadline, the silence of a contracting officer is considered a denial.
Quality of the Contracting Officer’s Final Decision
A contracting officer’s final decision must be the personal and independent decision of the contracting officer. It must consider the views of agency experts, but it still has to be a decision that is only the contracting officer’s and not the decision of some other person in the agency.
In numerous cases, particularly those involving highly technical issues, a contracting officer has an expert prepare a report. When the report is finished, the contracting officer often issues a contracting officer’s final decision that adopts the expert’s report in its entirely. Relying on an expert’s report does not necessarily rob the contracting officer’s decision of independence.
A construction contractor argued that the contracting officer’s final decision was invalid because it was a “wholesale adoption of a litigation expert’s report” and not the “personal and independent decision” of the contracting officer as required by FAR and applicable case law principles. The board refused to draw such an automatic conclusion as it set out the requirements of a valid contracting officer’s final decision. “It is well established that the contractor is entitled to a decision that has been independently rendered by the contracting officer. A decision issued by a contracting officer acting solely pursuant to the dictates of other, higher-level, personnel in the Government is not valid. At the same time, the regulations and case law anticipate that the contracting officer, particularly in complex matters, will seek and consider advice of counsel and experts as an integral part of the process of formulating a final decision. The contracting officer is not required to be isolated from the advice and guidance of others.”10
Congressional Reference Cases before the COFC
A contractor can also ask Congress to refer the claim to the COFC. The COFC also has jurisdiction over cases specifically referred to it by Congress. These so-called “congressional reference” cases require the court to review the cases and report back to Congress with recommendations for how they should be resolved. They are cases the court gets not because a plaintiff files the case before the court but because Congress asks the court to review the case and report back. Specifically, the court is to tell Congress whether or not what the taxpayer is asking for is “a legal or equitable claim against the United States, or a gratuity.” In other words, does the taxpayer have a legitimate gripe, or is a taxpayer looking for something for nothing—a gratuity?
In 1949 the Veterans Administration awarded a contract to JL Simmons Company Inc. for a construction project. The government specifications were defective, and Simmons filed a claim for damages. When the case was finally resolved in 1969, Simmons was awarded damages but no interest. (It wasn’t until 1978 that contractors could get interest on their claims.) And since the case was heard in the 1950s and 1960s, due process was different: Contractors didn’t have the right to cross-examine government witnesses at a claims hearing. All the contractor could do was submit written views on the government’s evidence. To win a congressional reference case, the contractor here had to prove that, decades ago, the lack of interest was the results of “wrongful or negligent conduct by the government.” It also had to prove that the absence of cross-examination was “a travesty of justice.” The contractor could not prove these. Although the one-sided proceeding before the board “undoubtedly seems out of step under today’s standards, those procedures were consistent with the approach used by many agencies at the time.” Nor could Simmons prove that this “travesty of justice” caused it to incur most of the interest requested. That was not true. The reason the Simmons case had dragged out through the 1950s and 1960s was that Congress and the Supreme Court were grappling with the issue of how government contract claims should be handled. So the court could find no wrongful conduct by the government and concluded that any damage award like interest would be a gratuity.11
WHEN MUST A CLAIM BE FILED?
Claims have two statutes of limitations or deadlines: a deadline to file claims with the contracting officer in the first place and then a deadline to appeal a contracting officer’s final decision to the appropriate BCA or the COFC.
The Statute of Limitations for Filing Claims with the Contracting Officer
A claim by a contractor has to be filed “within 6 years after the accrual of the claim.”12
Accrual is the key word here. Unfortunately, Congress did not give us a definition of accrual. So, FAR 33.201 gives us one:
“Accrual of a claim” means the date when all events, that fix the alleged liability of either the Government or the contractor and permit assertion of the claim, were known or should have been known. For liability to be fixed, some injury must have occurred. However, monetary damages need not have been incurred.
Because this six-year limitation applies only to contracts entered into on or after October 1, 1995, there have not been many decisions interpreting it yet.
One thing is clear—when the statute of limitations starts on breach of contract claims:
In breach of contract actions, accrual generally occurs at the time of breach.13
As always, there are exceptions.
A construction company sued the government for breach of contract because the government did not tell the contractor about asbestos. Asbestos injuries typically take years to show up in workers. The COFC concluded that since any worker injuries would show up l ater, years after the government’s alleged breach of contract, the contractor would have an opportunity to file claims for those injuries in the future. “Although a claim for breach of contract ordinarily accrues, and the statute of limitations begins to run, at the time of the breach, this is not always the case. . . . A claim does not accrue until the claimant has suffered damages. . . . The Federal Acquisition Regulations (‘FAR’) provide that a claim does not accrue until all events that fix the liability of the government occur. For liability to be fixed, some injury must have occurred. Accordingly, the statute of limitations for the plaintiff ‘s claims based on exposure to asbestos and lead and for cleanup costs and penalties will not begin to run until damages or injuries arise.”14
Another clear “accrual” requirement is that a claim cannot accrue until the contractor knows, or should have known, the “sum certain” required for establishing a claim.
A contractor wanted to submit a claim for subcontractor costs as part of a termination for convenience settlement. The government argued that the claim accrued when the subcontractor’s contract performance ended which was more than six years out. The contractor argued that its claim was timely because the subcontractor gave the contractor the sum certain for which both the subcontractor and contractor were asking from the government. According to the CAFC, “precedent illustrates that the limitations period does not begin to run if a claim cannot be filed because mandatory pre-claim procedures have not been completed.”15
There is a rare exception to the strict application of the six-year limit: equitable tolling. This principle holds that a statute of limitations is tolled or suspended where it would be unjust to rigorously apply a statute of limitations. The CAFC discussed this exception and noted that this principle applies “where the claimant has actively pursued his judicial remedies by filing a defective pleading during the statutory period, or where the complainant had been induced or tricked by his adversary’s misconduct into allowing the filing deadline to pass. We have generally been much less forgiving in receiving late filings where the claimant failed to exercise due diligence in preserving his legal rights.”16
The Statute of Limitations for Appealing a Contracting Officer’s Final Decision
A contracting officer’s final decision may be appealed to a BCA within ninety days of receipt by the contractor or to the COFC within one year of receipt. But the statute of limitations does not run unless the government can prove that the contractor actually received the contracting officer’s final decision.
A contractor does not officially receive a contracting officer’s final decision until there is an “objective indicia” of its receipt. If a contracting officer’s final decision is faxed, the government should confirm receipt with a follow-up phone call.
In November 2001, a contracting officer sent Riley & Ephriam Construction Company, Inc. (R&E) a contracting officer’s final decision denying R&E an equitable adjustment. The decision was mailed to R&E’s post office box and faxed to R&E’s attorney. But R&E received neither decision. Its attorney never received the fax, and the mailed document, sent “return receipt requested,” was never picked up at the post office and was eventually returned to the contracting officer, return receipt unsigned. The contracting officer tried again later and succeeded with a fax that R&E’s attorney received on January 30, 2002.
More than a year after the contracting officer sent the decision but less than a year after the attorney received the decision, R&E filed suit in the U.S. Court of Federal Claims. After the court said the appeal was too late, the contractor appealed to the CAFC, which reversed the lower court’s conclusion. It concluded that R&E’s clock started with the re-sent fax of January 2002. FAR makes the government give the contractor a copy of a final decision by “certified mail, return receipt requested, or by any other method that provides evidence of receipt.” Significantly, there must be “objective indicia of receipt by the contractor.” Here, the government’s fax and mail efforts resulted in no such “objective indicia.” R&E’s lawyer never got the contracting officer’s fax: “the government cannot produce a fax confirmation sheet for the November 27, 2001, fax to R&E’s attorney. Moreover, we cannot infer receipt from evidence of transmission” that the government had. “Proof of message exit from a transmitting machine cannot serve as a proxy for proof of actual receipt of the sent message by a remote receiving terminal.” The appeals court wanted “confirmation” of the fax and offered a simple solution: make a phone call. “All the government has to do is make a simple telephone call to the contractor or its authorized representative to affirm actual receipt of the fax. This simple step would give the government the assurance of actual receipt that the regulation requires it to have.” Nor was there any proof that the mailed final decision had been received by the contractor. The unsigned return receipt showed that the contractor had not received the final decision.17
Appeal to the COFC or BCA
If a contractor is not happy with the contracting officer’s final decision, the contractor has a choice: It can appeal to the COFC or to a BCA. But it cannot appeal to both, as shown by “the election doctrine” described below.
When a contractor brings an appeal of the contracting officer’s decision, it’s a whole new ball game on appeal. On appeal, the case is tried de novo (anew). This means that the contracting officer’s decision is by no means binding when it is appealed.
The significant downside of this for a contractor is that appealing a contracting officer’s decision can be risky. If the contracting officer has, in effect, given the contractor at least half a loaf of bread, an appeal of that decision could end up with the contractor’s having no bread at all. Because the case is de novo, the contractor has no guarantee that appealing the contracting officer’s final decision has no downside—that is, there is no guarantee that an appeal can result in only a win or at least no loss. As we will see, a contractor can come away from an appeal of the contracting officer’s decision to a court or board with much less money or with no money at all.
Election Doctrine
Contractors wanting to appeal a contracting officer’s final decision have a choice of two options. They can appeal to a BCA or file suit in the COFC. They can’t do both, no matter how unfortunate that might be.
Recall the earlier example of Bonneville Associates. Bonneville appealed a contracting officer’s final decision to the General Services Board of Contract Appeals. But before the board could act on the case, Bonne-ville asked the board to dismiss the case without prejudice, which the board did. Bonneville then went to the COFC, which dismissed the suit on the basis that Bonneville had previously elected to appeal to the board. The CAFC upheld this decision. Bonneville then went back to the board. But the board concluded that it, too, had no jurisdiction. Because the board’s earlier dismissal without prejudice was treated as if Bonneville had never been before the board in the first place, Bonneville’s return to the board was deemed a new appeal filed years after the ninety-day time limit imposed on such appeals. Dissenting from the board’s opinion, Chairman Daniels opined, “It must have been a decision like this one that caused Dickens’ Mr. Bumble to say, ‘If the law supposes that, the law is an ass.’“ The CAFC upheld the board’s decision. Having tried going down both roads, Bonneville ended up going down neither.18
But a contractor cannot elect a claim forum that has no jurisdiction. If the forum has no jurisdiction, there has been no election, so the contractor can appeal to the other forum.
Edward Grinnell had a contract with the U.S. Postal Service. While he was performing the contract, he got a contracting officer’s final decision denying him access to the Postal Service’s facilities. The final decision, however, did not state (as required by law) the appeal rights he had. Regardless, he appealed to the Postal Service Board of Contract Appeals but did so after the ninety-day deadline for appeals to a BCA had passed. He thought he might have a shot at the board’s hearing his appeal even though it was late because precedent gave some deadline flexibility when the contracting officer’s final decision had omitted the appeal rights. But he was not sure, so to cover his bets he also appealed to the COFC, this time within the one-year deadline for COFC appeals.
The government asked the COFC to throw his COFC case out because Grinnell had already “elected” to go to the BCA. The court refused, concluding that no election had been made because it was not clear that the board had jurisdiction of his late appeal: “An election does not become binding until the selected forum determines that it has jurisdiction over the appeal. The mere filing . . . of an appeal with the appropriate board of contract appeals was not a binding election . . . and did not bar the subsequent filing of a claim with the Claims Court if it was determined by the board that the contractor’s appeal to the board was untimely. Accordingly, under this doctrine, ‘a contractor’s choice to pursue an appeal in a forum lacking jurisdiction is not a binding election.’“ In this case, there could be no binding election until the BCA decided whether it had jurisdiction over Grinnell’s appeal: “In light of the fact that the BCA has not yet rendered a decision on the timeliness of Plaintiff ‘s appeal, the court finds that Plaintiff has not made a binding election.”19
De novo
The CDA says that “any action under [the CDA] . . . shall proceed de novo in accordance with the rules of the appropriate court.”20 This means that the parties start with a clean slate.21
The practical aspect of this is that the contractor has to decide whether to take what the contracting officer has given and run with it or to gamble and go to the board or the court for more. It is a gamble because going for more jeopardizes what the contracting officer has already given. For example, if the contracting officer awards the contractor $20,000, but the contractor thinks it should get $40,000, the contractor could appeal the contracting officer’s decision and try to get the extra $20,000 from the board or the court. But the contractor could fail to get the extra $20,000, and, worse than that, the board could order the contractor to return to the government the original $20,000 the contracting officer has already awarded. The contracting officer’s giving the contractor some money does not guarantee the contractor that it will get at least that much by appealing to a board or court.
A unique problem with claims litigation is the possibility that the claim the contractor presents to the contracting officer is not exactly the same as the claim the contractor brings to the board or COFC.
Typically, the longer people think about something, the more they learn about it. The longer litigation goes on, the different the arguments become. This is especially true of claims. It may take years for a contractor’s claim to get to the board or the COFC. The claim being appealed to the board or COFC may have started as a simple request for an equitable adjustment that the contracting officer granted only in part. The contractor then had to file a claim with the contracting officer that was denied and continued to appeal to a board or the COFC.
It is no surprise that in claims litigation the claim the board or the court sees is not always the same claim as the one the contracting officer saw. That’s the problem. The boards and court have jurisdiction over a claim that is generally the same claim the contracting officer saw. The key word here is “generally.” According to the CAFC, the test of whether a claim before the board or the court is different is whether the contracting officer had an ample pre-appeal opportunity to rule on a contractor’s request “knowing at least the relief sought and what substantive issues are raised by the request.”22
K-Con appealed to the COFC three discrete claims arising from its construction contract with the Coast Guard: that the liquidated-damages clause was unenforceable; that K-Con was entitled to time extensions that the Coast Guard never provided; and government changes to the work made K-Con perform $196,126.38 in additional work. The government argued that K-Con never presented the time extension claim to the contracting officer and never received a contracting officer’s final decision on that issue.
The COFC dismissed the time-extension claim and the CAFC agreed. According to the CAFC, the COFC did not have jurisdiction over K-Con’s time-extension claim because K-Con never presented that issue to the contracting officer for a decision.23
As the CAFC pointed out in that case, “merely adding factual details or legal argumentation does not create a different claim, but presenting a materially different factual or legal theory (e.g., breach of contract for not constructing a building on time versus breach of contract for constructing with the wrong materials) does create a different claim.” Another example the CAFC gave of a “different claim” is “a claim for damages related to three change orders was different from a claim for damages related to the collective nature of all the problems, changes and directives issued on the project.”
In typical civil litigation not involving claims, the parties can change their argument as they learn more about their case, perhaps through discovery. Similar changes in claims litigation can be a problem and can lead to the board or court losing jurisdiction over a claim.
Appeal to the CAFC
The final stage of the process is that a decision by the COFC or a board can be appealed to the Court of Appeals for the Federal Circuit.
At this stage, the appeal is not de novo. The appeals court usually will not second-guess what the board or the court has done. All the appeals court looks for is whether the court or board had “substantial evidence” for its decision.
The only time that the appeals court totally second-guesses the court or board is on contract interpretation issues. Regardless of what the forum below concluded, the appeals court can reach its own conclusion and have the final word on what contract terms mean.