requests for equitable adjustment & cda claims: a primer · pdf filebased on a change to...

7/20/2016

1

Solving Post-Award Problems Through Change Orders,

REAs, and Claims

Presented By:

MARIA L. PANICHELLIOF COHEN SEGLIAS PALLAS GREENHALL &FURMAN, P.C.

Requests for Equitable Adjustment & CDA Claims:

A Primer

2

Requests for Equitable Adjustment

Request for Equitable Adjustment (REA): Is a request for compensation

Either for time, money or both

3

7/20/2016

2

Requests for Equitable Adjustment

Request for Equitable Adjustment: Based on a change to the contract arising

during project performance. Examples:

• Differing Site Condition• Defective Specification• Change(s) (Constructive or Express)• Suspension of Work

4

REA Fundamentals

REAs lack the formality of claims

Generally considered a creature of “contract administration” as opposed to “litigation”

5

REA Fundamentals

Filed during project performance

Involves (theoretically) “negotiations”

As compared to a claim, procedural requirements are relaxed, more informal

6

7/20/2016

3

REA Fundamentals

Time for submittal: REAs may be submitted at any time during contract performance or close out

May not be submitted after contract close out

7

REA Fundamentals

Time for submittal: REA’s should typically be submitted within 30 days of change/dispute that gave rise to the REA Failure to do so will not necessarily bar the REA unless there was prejudice to the Government

8

REA FundamentalsFormat: No specific format required Typically takes the form of a letter to the Contracting Officer with any relevant exhibits, such as:

• Cost information• Correspondence between contractor and Government• Schedule updates• Change orders• Any other relevant information for the Government to

consider

The more detail, the better your chance of success

9

7/20/2016

4

REA Fundamentals

Costs: Preparation costs are recoverable

This includes legal and accounting fees, and internal costs

10

REA Fundamentals

Certification: Generally, REAs do not need to be certified

Exception: • Department of Defense contracts where the

value exceeds the simplified acquisition threshold requires certification

11

REA Fundamentals

Certification: Certification Language:

“I certify that the request is make in good faith, and that the supporting data are accurate and complete to the best of my knowledge and belief.” DFARS 243.204‐71 and 252.243‐7002

12

7/20/2016

5

Claims

A Claim: Is filed pursuant to the Contract Disputes Act (“CDA”), 41 USC 701 et seq.

Is a formal written request demanding payment/the adjustment of a contract price or interpretation of a contractual term, or seeking other relief pursuant to or relating to a contract

13

Claims

A Claim: Can lead to litigation:

• Before a Board of Contract Appeals (Armed Services or Civilian, depending on agency at issue) or,

• Court of Federal Claims

14

Claim Fundamentals

Claims are more formal than REAs• Requires certification

No longer a creature of “contract administration”, rather it constitutes the first stage of “litigation”

No longer a negotiation, positions are fixed

15

7/20/2016

6

Claim FundamentalsTime for Submittal: Must be filed within 6 years of claim accrual

• Jurisdictional issues• Equitable Tolling

A contractor must provide a Contracting Officer with notice of a claim prior to final payment on the contract

Claims should be filed within 30 days of cancellation of a stop‐work order

16

Claim Fundamentals

Format: No specific format required. Typically takes the form of a letter to the Contracting Officer with applicable exhibits, including:• Cost information• Correspondence between contractor and

Government• Schedule updates• Change orders• Any other relevant information for the

Government to consider17

Claim Fundamentals

Format:

Claim must include a clear and unequivocal written statement that puts the Contracting Officer on notice of the basis and amount of a claim

18

7/20/2016

7

Claim Fundamentals

Costs:

Preparation costs are NOT recoverable

19

Claim FundamentalsCertification: Certification is required for claims over $100,000

Certification language:• “I certify that the claim is made in good faith; that the

supporting data are accurate and complete to the best of my knowledge and belief; that the amount accurately reflects the contract adjustment for which the contractor believes the Government is liable; and that I am duly authorized to certify the claim on behalf of the contractor.” 48 CFR 33.207

20

Claim Fundamentals

Certification: Defective certification can be corrected, but this causes delay to the claim process; not recommended

What about subcontractor claims? Fraud issues?

21

7/20/2016

8

REAs v. ClaimsInformal v. Formal

Negotiations, Discussions v. Adversarial, Litigation

Certification (Usually) Not Required v. Certification Required

Costs Recoverable v. Costs Not Recoverable

Privilege Issues? 22

REAs v. Claims:Practical Considerations

When to file a REA:

When a contractor has a good working relationship with the Contracting Officer

When the agency had indicated they would be willing to negotiate a change/dispute with the contractor

When a contractor is attempting to show that its willingness to negotiate

23

When to file a Claim:

When the contractor and Contracting Officer do not have a good working relationship, or when there is an antagonistic or adversarial relationship

When it is clear that the Contracting Officer is not willing to negotiate a change/dispute, or when the Government has already stated that it does not believe the contractor is entitled to an equitable adjustment

When the Statute of Limitations is about to run out


24

7/20/2016

9

Keep in mind:

An REA can later be converted into a Claim

The filing of an REA does not preclude you from later filing a Claim, in fact, it is quite common to file both


25

REAs and Claims: Common Issues

Some of the most common issues leading to REAs or Claims: Differing Site Conditions (FAR 52.236‐2) Changes (Fixed Price) (FAR 52.243‐1) Changes to Prevailing Wages (FAR 52.222‐43) Variations in Estimated Quantity (FAR 52.211‐18) Stop Work Order (FAR 52.212‐13) Suspension of Work (52.242‐14) Terminations Damages Associated with Punitive Punch List Delays Good Faith and Fair Dealing, Duty to Cooperate Recent Case Developments: Declaratory Judgments?

26

REAs and Claims: What Type of Relief is AvailableA Contractor is Entitled to:

Costs

Additional Time (Relation to LDs?)

Reasonable Profit (sometimes)

27

7/20/2016

10

REAs and Claims: What Type of Relief is AvailableA Contractor is Entitled to: Field Overhead/General & Administrative

(“G&A”) Expenses

Home Offense Expenses (in very limited circumstances)

Bond Costs

Preparation Costs (REA Only)28

Subcontractor’s “Pass Through” Claims

29

Subcontractor “Pass Through” Claims

Sovereign Immunity – General rule is that lawsuits against the Federal Government are prohibited

Tucker Act creates an exception to sovereign immunity: suits may arise out of express or implied contracts to which the government was a party

• Thus, to take advantage of this exception, there must be an express or implied contract

• Because subcontractors have no “privity of contract” they can not file claims against the government on their own behalf

30

7/20/2016

11


To assert a claim, subcontractors’ claims must be “sponsored” by their prime contractors

Commonly called a “pass‐through” claim because the prime is “passing” the subcontractor’s claims through to the owner

Prime must clearly and affirmatively agree to sponsor the subcontractor claim

31


To assert a claim, subcontractors’ claims must be “sponsored” by their prime contractors

Recognized by FAR 44.203(c) allows a subcontractor the right of indirect appeal to the Board of Contract Appeals or Court of Federal Claims

Certification issues?

32


Subcontracts should address how these will be dealt with Disputes clause – distinction between claims between

subcontractor and prime, and disputes against owner

Should delineate each party’s responsibility with regard to pass‐through claims, i.e.:• Prime agrees to sponsor• Subcontractor agrees to cooperate fully

Appeal of Binghamton Simulator Company, ASBCA No. 59117 (2014)

33

7/20/2016

12


Addressing it in the subcontract is not always enough. Always a good idea to have a Liquidating, or Pass‐Through, Agreement

In these, prime agrees to “sponsor” the sub’s claim against the Government

Combined, or concurrent, with settlement or release agreements dealing with prime and sub’s claims against each other

34


Addressing it in the subcontract is not always enough. Always a good idea to have a Liquidating, or Pass‐Through, Agreement

Commonly, in a Liquidation Agreement, the sub agrees to release the prime in exchange for the prime’s promise to:

• Prosecute the sub’s claim against the government; and

• Pay the subcontractor some or all of the money recovered from the Government in connection with that claim

35


Remember: Every claim in excess of $100,000 on a federal construction project must be certified

A prime contractor passing through a subcontractor’s claim to the Government must include the certification language

36

7/20/2016

13


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

37


When agreeing to pass through a subcontractor’s claim, a prime should consider the Severin Doctrine:

A prime cannot recover from the Government for harm to the sub if either the subcontract or liquidating agreement eliminates the prime’s liability to the sub

38


However, a prime’s promise to its sub to reimburse the sub if and when recovery is obtained from the Government does not implicate the Severin Doctrine

The Severin Doctrine will not serve to bar a pass‐through claim unless the agreement between the sub and prime is an explicit and total release of the prime’s liability

39

7/20/2016

14


Can Primes retain a portion of the damages obtained from the Government in connection with the subcontractor’s pass‐through claim?

Courts in the federal contracting context have largely ignored dealing with whether this is appropriate• In a Board case, a sub and prime had a liquidating agreement that allowed

a $7,500 “sponsorship fee” to be retained by the prime, and the Board did not address this arrangement at all in the opinion

A United State District Court, addressing a state government contract, allowed a prime to retain a portion of the sub’s damage award based largely on the principles of freedom of contract

40

CDA Claims: Appeals & Litigation

41

Claims Appeal ProcessWhat happens after a claim is filed?

FAR 33.211 ‐ When a claim by or against a contractor cannot be satisfied or settled by mutual agreement and a decision on the claim is necessary, the contracting officer shall:

Review the facts pertinent to the claim

Secure assistance from legal and other advisors

Coordinate with the contract administration officer or contracting office, as appropriate

Prepare a written decision

42

7/20/2016

15

Claims Appeal ProcessThe written decision shall include:

A description of the claim or dispute

A reference to the pertinent contract terms

A statement of the factual areas of agreement and disagreement

A statement of the contracting officer’s decision, with supporting rationale

Paragraphs explaining that the decision constitutes the final decision of the Contracting Officer, and explaining to the contractor their right to appeal, and the procedure for doing so

43

Claims Appeal ProcessWhen will this written decision be completed?

For claims of $100,000 or less:• 60 days after receiving a written request from

the contractor that a decision be rendered within that period

• Or within a reasonable time after receipt of the claim if the contractor does not make such a request.

44

Claims Appeal ProcessWhen will this written decision be completed?

• For claims over $100,000:• 60 days after receiving a certified claim

• However if a decision will not be issued within 60 days, the contracting officer shall notify the contractor, within that period, of the time within which a decision will be issued

45

7/20/2016

16

Claims Appeal ProcessWhen will this written decision be completed? (cont.)

The contracting officer shall issue a decision within a reasonable time, taking into account

The size and complexity of the claim

The adequacy of the contractor’s supporting data

Any other relevant factors

46

Claims Appeal ProcessAppeals: A contractor may appeal their claim to either a Board of Contract Appeals (Armed Services or Civilian, depending on the Agency involved with the Contract at issue) in two circumstances:

Contracting Officer issues a final decision on a claim denying the claim

• Called a “Contracting Officer’s Final Decision”

Contracting officer does not issue a decision

• Can take appeal as a “deemed denial” appeal

47

Claims Appeal ProcessWhere can a contractor file an appeal? And when?

Board of Contract Appeals (90 days)

Court of Federal Claims (12 months)

48

7/20/2016

17

Claims Appeal ProcessWhere SHOULD you appeal? Which forum is best for you?

Court of Federal Claims (“COFC”)

Article 1 Court 11 Judges, serving 15 year terms, and an additional 6

active Senior Judges Highly intelligent judicial officers, but no government

contracts experience needed to become COFC judges Can tax costs and assess attorney’s fees Single Judge decides the case Attorney representation required

49


Armed Services Board of Contract Appeals (“ASBCA”)

Jurisdiction over DoD and NASA CDA contracts

21 members, experienced Judges

Decisions by panels, but a single judge takes the evidence

Contractor may appear pro se

50


Civilian Board of Contract Appeals (“CBCA”)

Est. January 2007

Consolidated 8 separate civilian boards, including very active GSBCA (GSA)

Jurisdiction over all civilian agency CDA contracts, other than those of the Postal Service and TVA

13 members, experienced Judges

Decisions by panels, but a single judge takes the evidence

Contractor may appear pro se

51

7/20/2016

18


Key considerations:

Size of Contract/Dispute Amount v. Cost of Litigation Complexity of Issues Government Contracting Experience of Judges Preparation Time Required Objectivity v. Settlement Authority (Agency Counsel v. DOJ) Appeal Filing Deadlines Ruling Precedent, Trends in Decisions Formality Timing (Attorney Preference – Educate yourself)

52

Claims Appeals: Common Government Defenses

The Government tends to rely on the same defenses over and over. Some of the favorites include:

Waiver, Release or Accord & Satisfaction

Notice

Lack of Governmental Authority

53

Waiver/Release/Accord & Satisfaction

Contract Modifications often include broad waiver language that purports to release the Government from further liability

54

Claims Appeals: Common Government Defenses - Waiver

7/20/2016

19

For example:

CLOSING STATEMENT: “It is understood and agreed that pursuant to the above, the contract time is extended the number of calendar days stated, and the contract price is increase as indicated above, which reflects all credits due the Government and all debits due the Contractor. It is further understood and agreed that this adjustment constitutes compensation in full on behalf of the Contractor and its Subcontractors and Suppliers for all costs and markups directly or indirectly attributable for the change ordered, for all delays related thereto, for all extended overhead costs, and for performance of the change within the time frame stated”

55


It is vital to understand the difference between bilateral and unilateral modifications, and the impact this difference can have on a waiver/release or accord & satisfaction defense:

Unilateral – signed only by the Government Bilateral – signed by Government and

Contractor, can function as “accord and satisfaction”

56


The lesson(s)?

Be aware of waiver language before you sign Add your own language to any release to make

it clear that you take exception and that you reserve your rights to file a claim in the future

Be aware that the Government will sometimes apply pressure, or withhold modifications to entice you to sign

57


7/20/2016

20

What if you DID sign a modification with broad waiver language?

Is an obstacle, but not an insurmountable one. There are several responses that can help defeat a waiver argument based on release language in a modification

58


1. Scope

Remember the language from the closing statement: “. . . constitutes compensation in full on behalf of the

Contractor and its Subcontractors and Suppliers for all costs and markups directly or indirectly attributable for the change ordered . . .”

What do the earlier sections of the modification say about the scope of the “change ordered”?

59


2. Date

What was the date of the modification? What was the date, or the range of dates on which you were effected/for which you are claiming compensation?

60


7/20/2016

21

3. Is there any other way to defeat an accord and satisfaction defense?

Accord and Satisfaction Elements:• Proper subject matter• Competent parties• Meeting of the minds of the parties• Consideration

Can you disprove any of these elements?

61


Can you disprove any of these elements? (cont.)

Where the parties continue to consider the claim after execution of a release, such conduct manifests an intent that the parties never construed the release as an abandonment of plaintiff's earlier claim.

Cmty. Heating & Plumbing Co. v. Kelso, 987 F.2d 1575, 1581 (Fed. Cir. 1993)

62


Notice

Government often argues that the contractor failed to give the Government the requisite notice, and that the lack of notice bars the contractor’s claim(s)

Particularly prevalent in differing site condition and constructive change claims

63

Claims Appeals: Common Government Defenses - Notice

7/20/2016

22

Notice

Responses to a Notice argument

• Notice need not be in any particular form (Serial Letter?)

• Actual v. constructive notice

• Lack of prejudice

64

Claims Appeals: Common Government Defenses - Notice

Another common argument made by the Government, in particular in the “Changes” context, is that the Government official that made the change did not have the authority to bind the Government, and that the contractor’s claim is therefore barred

65

Claims Appeals: Common Government Defenses - Authority

Who has authority to bind the Government?

The Contracting Officer Any formally‐designated representative:

• ACO, COR, COTR Any representative assigned without formal designation

Different dollar levels of authority?

66


7/20/2016

23

How do you know who has been designated as having authority?

Solicitation/Contract might designate who has authority, and to what amount

If not in the Solicitation, might be another writing (letter, modification, amendment, etc.)

Often conveyed (or reiterated, or altered) at pre‐construction (or other) meeting

67


When is the Government bound by a Government representative’s actions?

Government is bound when an official acted within the scope of their ACTUAL authority, is NOT bound by “apparent” authority

But when else is it bound? What type of response can you offer when someone technically acted outside the scope of their authority and the Government uses this as a defense?

68



When a Government official acted with “implied” authority

• A government representative will be deemed to have implied authority when “it is an integral part of the duties assigned to the particular government employee.”

• A government representative can be found to have implied authority to make a change to the Contract if the change is within, or reasonably related and consequent to, the representative’s official responsibilities

69


7/20/2016

24


More on “implied” authority, Wieman v. U.S., 230 Ct. Cl. 563

• On‐site representative had implied authority based on: (1) the acquiescence and acceptance by the Government of benefits accruing to it from direction by on‐site representatives of the CO; and (2) the fact that the on‐site representative was authorized, although not contractually, to direct the contractor’s work and the contractor was expected to comply

• Obvious from on‐site representative’s daily inspections and other on‐site actions that the CO had delegated the “broad discretion in supervising [the] contract” and exercised that delegated authority on a daily basis

70



An unauthorized representative’s directives can be “ratified” by the government at a later date; if a superior with explicit authority to bind the government later endorses the directives given by a government representative, that representative’s actions are considered “ratified” by the government, and a contractor may be entitled to a equitable adjustment of the Contract price in connection with such directives

71


Subcontractor v. Prime Contractor Claims

72

7/20/2016

25

Sub’s Lawsuits Against PrimeWhat if a prime breaches the subcontract?

If a nonpayment issue, sub should serve timely notice of nonpayment upon prime and prime’s surety

73

Sub’s Lawsuits Against PrimeWhat if a prime breaches the subcontract? If prime continues to refuse to honor subcontract, sub can:

• Bring suit against the prime in the appropriate U.S. District Court

• Submit a claim to the prime’s surety

74

Sub’s Lawsuits Against PrimeCommon Issues in Sub v. Prime Litigation

Pay if Paid v. Pay When Paid?

Exhaustion of Administrative Remedies

ADR

Jurisdiction (Colorado cases example)

75

7/20/2016

26

Miller Act Claims

76

The Miller Act ‐ 40 USC 3131‐3134

Mandates the furnishing of payment bonds and performance by Federal prime contractors

Defines and limits where and when a bond claim may be brought

Thus addresses two concerns that would otherwise exist in the performance of federal government construction projects . . .

77

Miller Act Claims

When does the Miller Act Apply?

Applies to all projects for the construction, alteration or repair of any public building or public work of the federal government where the prime contract exceeds $100,000• “Public Work” not defined by Act

Alternates allowed for contracts more than $25,000 and less than $100,000: (Bond, Letter of Credit, Escrow Agreement, CD, Cash)

78

Miller Act Claims

7/20/2016

27

Who is a Miller Claim against?

A subcontractor Miller Act claim is not brought against the Prime Contractor

A subcontractor Miller Act claim is brought against the Prime Contractor’s surety/sureties

79

Miller Act Claims

How does a First‐Tier Subcontractor Bring a Miller Act Claim?

No notice required Must wait 90 days from non‐payment – waiting

period to give bond principal a chance to make payments

Must file suit within 1 year of last work performed or materials supplied• Contract work v. Punch list or warranty work

80

Miller Act Claims

How does a Second‐Tier Subcontractor Bring a Miller Act Claim?

All requirements from previous slide

PLUS

MUST provide notice within 90 days (strictlyconstrued!) of supply of last labor or supplies

81

Miller Act Claims

7/20/2016

28

Questions?

82

Maria L. Panichelli, [email protected]@MariaPanichelli (twitter)www.linkedin.com/in/mariapanichelli/

83

Contact Information

requests for equitable adjustment & cda claims: a primer · pdf filebased on a change to...

Documents