July 12, 2018
Author: Jack Rephan
Organization: Pender & Coward, P.C.
A. Pre-litigation Claims Processes
(1) Federal Contracts
a. Contract Disputes Act of 1978
The Contract Disputes Act of 1978 ("CDA")1 governs the submission and resolution of all claims against the Federal Government. In addition to setting forth procedures for the submission and resolution of claims against the Government, this Act also covers such things as interest on claims, certification of claims and civil penalties for false claims. The CDA applies to all contracts entered into after March 1, 1979 with any executive agency of the government. It covers the procurement of property other than real property, the procurement of services, the construction, alteration, repair or maintenance of real property and the disposal of personal property. The CDA establishes a six year statute of limitations for the submission of any claims in writing to the contracting officer. The CDA covers all disputes arising under or relating to any contract subject to the Act and breach of contract claims.
b. Definition of "Claim"
The term "claim" is not defined by the CDA. However, the Federal Acquisition Regulations ("FAR")2 defines a claim as "a written demand or written assertion ... 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." It should be noted, however, that if a claim exceeds the sum of $100,000, it is not a "claim" under the CDA until it is certified as required by the Act and by FAR 33.207. Vouchers, invoices and other routine requests for payment, which are not in dispute, do not fall within the definition of a "claim".
c. Claim Requirements
In order to constitute a "claim” under the CDA and the FAR, there are three requirements which must be met:
1. Written Demand
Both the CDA3 and the FAR4 require that any claim be submitted in writing to the contracting officer. The claim must contain sufficient information to inform the contracting officer of what is being claimed and to allow a meaningful review of the claim. Any available backup documents should be submitted with the claim. The claim should also state that it is being submitted to the contracting officer for a decision under the CDA.5
2. Sum Certain
Any claim must seek a "sum certain". Any claim for monetary relief should include the exact amount claimed. Any claim which is vague as to the amount being sought runs the risk of not being considered by the contracting officer.
3. Request for Final Decision
In order to comply with the requirements of the CDA the language of the claim should make it reasonably clear that the contractor is asking for a final decision with respect to the claim. The request does not have to be explicit, and there are no magic words which are required to be used as long as it is reasonably clear that the contractor is asking for a final decision of the contracting officer with respect to the claim.
d. Certification Requirement
The CDA6 requires that the contractor certify any claim in excess of $100,000 that it has been made in good faith, is accurate and complete and reflects the amount the contractor believes that it is entitled to recover. At one time, a proper certification was jurisdictional for any claims in excess of $100,000. However, under the Federal Courts Administration Act, enacted in 1992, a proper certification is no longer a jurisdictional requirement for a court or agency board to consider a claim. This Act did not eliminate the requirement for certification of claims in excess of $100,000. However, any defective certification must be corrected before the entry of a final judgment by the court or a decision by any agency board or contract appeals. For the purpose of calculation of interest, the correction of a defective certification relates back to the date of the original certification. Although the CDA does not set forth the precise language of the certification, the FAR7 requires that the certification contain the following 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 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".
e. Authority of Contracting Officer
Under the CDA, a contracting officer is given authority to act as a quasi judicial official with respect to final decisions under the disputes clause of the contract. The contracting officer's final decision constitutes the event which starts the appeal process and confers jurisdiction to either an agency board of contract appeals or the United States Court of Federal Claims. Under the FAR8, the contracting officer is given broad authority to resolve any claims arising under or relating to a contract subject to the CDA. Included within the authority of the contracting officer is the power to settle, compromise, pay or adjust any claim other than any claim involving fraud.
f. Contracting Officer's Final Decision
The contracting officer must issue his final decision within sixty days of its receipt of a contractor's claim where the amount of the claim is less than $100,000. If the amount of the claim is more than $100,000, he either must issue a final decision or inform the contractor when a decision will be issued within sixty days of the date of the submission of the claim. In addition, there is a reasonable time limitation with respect to any final decision. If the contracting officer fails to issue a decision within the specified time limits, or within reasonable time, it may be considered by the contractor as "deemed denied" in which case the contractor may appeal to the agency board of contract appeals or file suit against the Government in the Court of Federal Claims.9 The board or the court may also suspend the proceedings pending receipt of a final decision of the contracting officer.
1. Finality of Final Decision
If the contractor fails to file an appeal or suit within the statutory time periods, the contracting officer's decision will be final and conclusive. Under the CDA10 the contractor has the election to either appeal the final decision to a board of contract appeals or file an action in the Court of Federal Claims. Any appeal to an agency board of contract appeals must be filed within ninety days of receipt of the final decision. Any action in the Court of Federal Claims must be filed within one year of receipt of the final decision.
(2) Virginia State and Local Public Contracts
a. Contract Claims
Under Virginia Code Section 2.2-4363, any contractual claims, whether for money or other relief, must be submitted in writing no later than sixty (60) days after final payment. Written notice of the contractor's intention to file a claim must also be given at the time of the occurrence or the beginning of the work upon which the claim is based. This notice requirement is enforced strictly by the courts in Virginia and is jurisdictional since it is a condition to the Commonwealth’s waiver of sovereign immunity. Thus, any failure to give the required notice in a timely manner will be fatal to the claim.
b. Procedure for Consideration of Claims
Section 2.2-4363B of the Virginia Code requires that each public body include in its contract a procedure for consideration of contractual claims. Such procedure may be contained either in the contract or may be incorporated by reference into the contract, and shall establish a time limit for a final decision of the public body. The public body may also establish an administrative procedure to hear appeals from decisions on disputes arising during the performance of a contract. Virginia Code Section 2.2-4365. If the public body has established administrative procedures meeting the standards of Section 2.2-4365, such procedures shall be contained in the contract or incorporated by reference into the contract and shall be made available to the contractor.
If the public body fails to include in its contract a procedure for consideration of contractual claims then under Virginia Code Section 2.2-4364C, the following procedures apply:
(1). The claim, whether for money or other relief, must be submitted in writing no later than sixty (60) days after receipt of final payment and written notice of the contractor's intention to file the claim must be given at the time of the occurrence or the beginning of the work upon which the claim is made.
(2). The decision denying a claim or addressing issues related to the claim will be considered a denial of the claim unless the written decision is signed by the public body's chief administrative officer or his designee. The contractor may not institute legal action prior to the receipt of the final written decision on the claim unless the public body fails to render a decision within ninety (90) days of the submission of the claim. If the public body fails to render a decision within ninety (90) days, the contractor shall have the right to immediately institute legal action under Virginia Code Section 2.2-4364.
(3). Under Virginia Code Section 2.2-4363D the receipt of the public body's decision on a claim is a condition precedent to the right of the contractor to invoke the administrative procedures meeting the standards of Section 2.2-4365, if available, or to legal action under Section 2.2-4364 unless the public body fails to render a decision within the ninety (90) day period provided for under Section 2.2- 43 63 C. If the public body has established administrative procedures meeting the standards of Section 2.2-4365, then the contractor has the option of either invoking such administrative procedures or filing suit. However, if the contractor elects to invoke such administrative procedures, it may not file suit until the conclusion of the administrative procedure.
(4). Under Virginia Code Section 2.2-4363 A, the decision of the public body becomes final and conclusive unless the contractor either appeals within six months of the date of the final decision institutes legal action.
(1) Federal Contracts
(a) Available Forums
The Contract Disputes Act gives to a contractor the option to pursue its claim either filing a suit against the Government in the Court of Federal Claims or by filing an appeal to the appropriate agency board of contract appeals.11
1. The Court of Federal Claims
The Court of Federal Claims is an Article I Court having jurisdiction of any suit for money against the United States, founded upon the Constitution, an Act of Congress, an Executive Order, a regulation of an executive agency, a patent, or an express or implied-in-fact contract with the United States Government. The court also hears bid protests. The court is located in Washington, DC.
2. Agency Boards of Contract Appeals
Under the CDA12, the head of an executive agency has the right to establish a board of contract appeals. The jurisdiction of the boards is limited to appeals from final decisions of contracting officers. However, the boards may enter into an agreement to hear appeals from non-governmental agencies, for example, the Washington Metropolitan Area Transportation Authority. At the present time, there are two primary boards of contract appeals. These are: The Armed Services Board of Contract Appeals (ASBCA) and the Civilian Board of Contract Appeals (CBCA). The ASBCA has jurisdiction to hear appeals from final decisions of contracting officers relating to contracts with the Department of Defense, the Department of the Army, the Department of the Navy, the Department of the Air Force or the National Aeronautics and Space Administration. The CBCA has jurisdiction to hearing appeals from the final decisions of a contracting officer relative to contracts with any executive agency other than those within the jurisdiction of the AGBCA or the United States Postal Service, the Postal Regulatory Commission or the Tennessee Valley Authority. Both of the boards are headquartered in the Washington, DC metropolitan area but conduct hearings at other locations as may be agreed to by the parties.
(b) Rules of Procedure and Discovery
The Federal Rules of Civil Procedure do not apply to the Court of Federal Claims which has adopted its own procedural rules. This court’s rules do, however, incorporate the Federal Rules whenever appropriate. Discovery in the Court of Federal Claims parallels discovery in any federal district court. While the Office of Federal Procurement Policy has issued a set of Uniform Rules of Procedure to be used by agency boards, and while all of the boards have adopted many of the proposed procedures, none of the boards have adopted them completely. While the boards are also not bound by the Federal Rules of Civil Procedure, they normally will look to the Federal Rules for guidance on procedural matters. Discovery before the boards is generally the same as that before the courts.
(c) Appeal File or “Rule 4” File
A unique feature of instigating a claim before an appeal board is the requirement that the contracting officer must assemble and send to the board within thirty days after the Notice of Appeal all documents relevant to the appeal. This would include the contract, the claim and all relevant correspondence between the parties. The contractor may thereafter supplement the appeal file with any additional documents as long as it does so within thirty days. Absent objection to the inclusion of documents in the appeal file, it becomes part of the record for the board.
Many cases are disposed of in the Court of Federal Claims by a motion for summary judgment by either the contractor or the government. On the other hand, in the disposition of a case before a board, the granting of a motion for summary judgment is less likely since most of the boards have a tendency to want to hear all of the facts of a case before making a decision.
(e) Trial or Hearing
A trial in the Court of Federal Claims or a hearing before an agency board is de novo and findings of fact and conclusions of law of the contracting officer have no binding effect. The Court of Federal Claims follows the Federal Rules of Evidence and a trial before that court is conducted in a manner very similar to a trial in any other federal court. On the other hand, agency boards are not bound by the Federal Rules of Evidence but normally will consider such rules when making decisions on evidential issues. The boards are more lenient than the court with respect to allowing evidence to be received. For instance, the boards generally will allow hearsay evidence although they will decide what weight should be given to such evidence.
(f) Location of Trial or Hearing
Normally, trials or hearings before the Court of Federal Claims or an agency board are held in the Metropolitan Washington, DC area. Hearings may be held, however, outside of the Washington, DC area for the convenience of the parties and the witnesses.
Both the Government and the contractor have the right to appeal an unfavorable decision of the Court of Federal Claims or an agency board to the United States Court of Appeals for the Federal Circuit. However, any appeal by the Government requires approval of the head of the agency and the Attorney General. An appeal from a decision of the Court of Federal Claims must be initiated by the filing of a Notice of Appeal within sixty days after the date the judgment becomes final. An appeal from an unfavorable board decision must be filed within one hundred twenty days from the date of the receipt of the board's decision. Conclusions of law are reviewed de novo by the Federal Circuit. However, findings of fact will not be reviewed unless they are "clearly erroneous" or not supported by "substantial evidence".
2. Virginia State and Local Public Contracts
Under Virginia Code 2.2-4364E, contractors are given the right to bring an action involving a contract dispute with a public body in the appropriate circuit court. In Code Section 2.2-4364 it is expressly provided that the contractors need not use the administrative procedures meeting in the standards of Section 2.2-4365, if available. However, if those procedures are invoked, they must be exhausted prior to instituting legal action unless the public body agrees otherwise. Any suit to challenge the decision of a public body is governed by the same rules of procedure as in the case of the trial of any other case in a circuit court and the rules of evidence applicable to any other circuit court action will apply. Under Section 2.2-4366 of the Code of Virginia, public bodies are expressly given the authority to enter into an agreement to submit disputes arising under contracts entered into pursuant to the Virginia Public Procurement Act to arbitration., mediation and other alternate dispute resolution procedures. However, while municipal governments and other local public bodies may agree to binding arbitration, any such procedures entered into by the Commonwealth of any department, institution, division, commission, or bureau thereof, or by any school board, are required to be non-binding.
C. Alternate Dispute Resolution
a. The Administrative Dispute Resolution Act
The Administrative Dispute Resolution Act ("ADRA"), Public Law 101- 552 and Public Law 104-320 authorizes the use of alternate dispute resolution by the government. Although the ADRA defines alternate dispute resolution to include arbitration, mediation and other forms, this Act specifically addresses only arbitration, in addition to ADRA, FAR 33.204 and 33.214 offer guidance on the use of alternate dispute resolution. The ADRA does not apply to the courts of the United States. However, the Court of Federal Claims has adopted its own alternate dispute resolution procedures.
b. Types of Government Alternate Dispute Resolution
Under the ADRA both parties must consent to arbitration. The agreement to arbitrate must be in writing and must specify the maximum award that may be made by the arbitrator unlike other arbitration where the amount of the award is governed by the amount of the claim. Also, binding arbitration may be used by an agency only after the head of the agency, in consultation with the Attorney General, has issued guidelines on the use of binding arbitration. Any agreement to arbitrate is enforceable under the Federal Arbitration Act. The parties may present evidence and testimony at the arbitration hearing in eventually the same manner as any other arbitration. The award must be made within thirty days of the close of the hearing or the filing of any briefs.
Unless the agency's "rules" provide otherwise, the award must include a brief discussion of the legal and factual basis for the award but formal findings of fact and conclusions of law are not required. The award becomes final thirty days after its receipt but this period can be extended for an additional thirty days by an agency. An award may be enforced under the Federal Arbitration Act. Any judicial review of an award is also governed by the Federal Arbitration Act.
The most common form of ADR in the federal contract arena is mediation. Mediation, of course, is a nonbinding ADR process before a neutral third party where function is to facilitate a settlement. Government mediation is basically the same as private mediation except that any settlement worked through mediation must be justified by the government and thus the merits of the government's case will normally play a more important role than other considerations as might be the case in private mediation.
c. Other Alternate Dispute Resolution Processes Other alternate dispute resolution procedures sometimes used in conjunction with disputes under federal contracts include mini-trials and dispute resolution boards.
Virginia also has adopted an Administrative Dispute Resolution Act13, under which a public body may use dispute resolution procedures to narrow or resolve any issue in controversy. However, any agreement arising out of any dispute resolution proceeding is nonbinding unless the public body affirms the agreement.
1 41 USCA 7101-7109
2 FAR 2.101
3 41 USCA 7103(a)(2)
4 FAR 33-206
5 41 USCA 7103(a)(1)
6 41 USCA 7103(1)(b)
7 FAR 33.207
8 FAR 33.210
9 41 USCA 7103(4); FAR 33.211
10 41 USCA 7104
11 41 USCA 7104
12 41 USCA 7105