Walking a Fine Line: ASBCA Explains How a Contractor's Request for Equitable Adjustment Could Actually Be(come) a Contract Disputes Act Claim

Litigation Alert
04.01.2021

A recent Armed Services Board of Contract Appeals (ASBCA or the Board) decision highlights the key distinctions between a contractor's request for equitable adjustment (REA) and a certified "claim" under the Contract Disputes Act (CDA) for purposes of meeting the CDA's 90-day deadline to appeal from a contracting officer's final decision (41 U.S.C. § 7104). In BAE Systems Ordnance Systems, Inc., ASBCA 62416 (Feb. 10, 2021), the Board reminds us that the wording of an REA and a contractor's post-REA conduct can be determinative of whether a subsequent appeal to the Board will be dismissed as untimely. 

Background

BAE Systems Ordnance Systems, Inc. (BAE) held two contracts with the Army for facilities support and propellant production at the Radford Army Ammunition Plant in Virginia. During performance, a question arose as to which party was responsible for costs related to environmental conditions and the resultant fines paid by BAE. Thereafter, the contractor submitted three letters, labelled "REAs," to the government that cited Federal Acquisition Regulation (FAR) 52.243-1 Changes – Fixed Price and Defense Federal Acquisition Regulation Supplement (DFARS) 252.243-7002 Requests for Equitable Adjustment. The letters did not contain the language required for claims certification under 41 U.S.C. § 7103(b) of the CDA. After several rounds of correspondence, the contracting officer (CO) issued a "final determination," finding that BAE had not established entitlement to compensation. The CO letter made no mention of a contracting officer's final decision and directed BAE to submit a claim if it opposed the determination. 

In June 2019, BAE submitted a claim that requested almost identical amounts to those in the three letters and certified the claim in accordance with the CDA. On February 24, 2020, after several months had passed with no response from the Army, BAE appealed the denial to the ASBCA. The Army moved to dismiss the appeal, arguing that the appeal was untimely because the earlier REA letters were CDA claims and that the CO's final determination regarding them was a COFD. Under the CDA, a contractor may challenge a CO's final decision on a claim by filing a notice of appeal at the ASBCA within 90 days of receiving of the decision. See 41 U.S.C. § 7104. Generally, the Board lacks jurisdiction over an appeal if it is filed after the 90-day deadline has expired. Cosmic Constr. Co. v. United States, 697 F.2d 1389, 1390 (Fed. Cir. 1982).

Summary of Decision

In response to the Army's motion, BAE made two primary arguments: (1) the letters were REAs because they used the REA certification language of DFARS 252.243-7002 Requests for Equitable Adjustment and could not be considered claims until they were amended to use the claim certification language required by the CDA (41 U.S.C. § 7103(b)), and (2) the letters were not CDA "claims" because they did not explicitly request a contracting officer's final decision (COFD). The Board's decision sets forth three noteworthy points:  

  • First, the Board emphasized the "blurry" line between an REA and a CDA claim, noting "there is no bright-line distinction." An REA is a contractor request to a contracting officer to consider adjusting the contract terms. While not defined by the CDA, FAR 2.101 states that a claim is "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 related to the contract." A claim, however, requires "no particular form or use any particular wording." M. Maropakis Carpentry, Inc. v. United States, 609 F.3d 1323, 1327 (Fed. Cir. 2010). Therefore, according to the Board, the distinction between an REA and a CDA claim will often come down to "whether the contractor has requested a final decision from the CO." 
  • Second, the Board rejected the argument that BAE's letters could not be "claims" unless and until they were amended to include the claim certification language required by the CDA (41 U.S.C. § 7103(b)). In Air Services, Inc., ASBCA No. 59843, 15-1 BCA ¶ 36,146, the Board held that REA certification language could be considered a "defective, but curable CDA certification." Similarly, the Court in Hejran Hejrat Co. Ltd v. United States Army Corps of Engineers, 930 F.3d 1354 (Fed. Cir. 2019) found an REA with the DFARS 252.243-7002 language to constitute a claim. Relying on this precedent, the Board held in BAE Systems that the running of the statute of limitations is not delayed simply because a contractor may need to correct a defective certification. 
  • Third, the Board distinguished Hejran Hejrat, where a contractor's self-styled REA was determined to be a CDA claim based on the parties' year-long course of dealing that culminated in an implied request for a COFD. Unlike the contractor in Hejran Hejrat, BAE did not make any certifications besides the one included in its original REA letters, and its position remained consistent in all its communications with the government. The Board also noted that the Army's reading of Hejran Hejrat would effectively do away with non-claim REAs, an "important aspect of contract administration" that was not abolished by the Federal Circuit's decision in that case. Rather, the Board explained, the decision to submit a claim or a non-claim REA is solely up to the contractor, and BAE avoided converting its REAs into claims by "scrupulously refraining from requesting a CO's final decision." 

Takeaways

The BAE Systems decision reminds us that it is critically important to draft REAs with language that cannot be reasonably construed as requesting a contracting officer's final decision. Taking the time to review the contents of an REA will reduce the risk that the request will be interpreted as a claim that could later trigger the CDA's 90-day appeals deadline to the Board. The decision also teaches that contractors should carefully monitor and control correspondence and dealings with the government after submitting an REA, as their course of conduct could give rise to an implied request for a COFD. Finally, contractors should be aware that the government's use of ambiguous language – such as a CO's issuance of a "final determination" – may allow the government to argue a claim has occurred and attempt to jurisdictionally bar it. 


For more information, please contact:

Jason N. Workmaster, jworkmaster@milchev.com, 202-626-5893

Alex L. Sarria, asarria@milchev.com, 202-626-5822

Connor Farrell, a Miller & Chevalier law clerk, contributed to this client alert.


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