How the Boards of Contract Appeals Work—And Why It Matters for Your Bottom Line, Part 2

This week, we take a closer look at how a government contractor ends up before a Board of Contract Appeals (BCA). CDA appeals don’t appear out of thin air—it can take months, if not years, for a dispute to morph into an appeal. The choices federal contractors make along the way have a tremendous impact on their chances of successful litigation before the BCA. In this installment of our four-part series, PilieroMazza’s GovCon attorneys walk through a typical CDA dispute and identify three top tips every government contractor needs to know. Visit this link to access Part 1 in this series.

1. The Claim Game

CDA disputes affect even the most diligent government contractors. The government may terminate for convenience, failing to pay an invoice, refusing delivery of goods, changing the terms of a contract, or refusing to pay added costs—in short, there are a number of disputes that could arise over the life of a contract. You could perform perfectly in line with a contract’s requirements and still find yourself dealing with a situation where your company is entitled to money that the government won’t pay. Many government contractors have recently faced this unfortunate reality, as Stop Work Orders and Terminations have been a major cause of termination settlement proposals (TSPs), requests for equitable adjustment (REAs), and resultant claims, given the Administration’s changing priorities.

Your first step is to understand your contract and your dispute, as some come with their own built-in notice requirements. For example, construction contracts will often contain provisions requiring the contractor promptly notify the government if an event occurs that will alter the schedule and, for a differing site conditions claim, FAR 52.236-2 explicitly requires the contractor provide prompt notice before the conditions are disturbed. While both of our examples highlight common construction issues, unique notice requirements are not exclusive to any one industry—if you’re unsure whether your contract or dispute requires early and/or specific notice to the government, engage your legal counsel at the first sign of a dispute to ensure you are meeting these requirements and not inadvertently creating barriers to your recovery.

Provided your contract or dispute isn’t a unique situation like those described above, disputes are often followed by an REA.[i] There is no requirement to file an REA before a claim, and there is no set timeline to file an REA (though there is a statute of limitations on claims, discussed below, so contractors should always submit REAs well in advance of the claim deadline), but this does not mean that REAs aren’t worth the time and effort. Most contractors plan to work with the government long into the future and want to preserve the relationships they have worked hard to build. With that context, filing an REA and allowing the government a chance to informally and amicably work through the issue with the contractor is a great way to show good faith. In short, contractors who don’t have reason to skip straight to a claim (and we’ve outlined three major reasons contractors may want to do just that in the following paragraph) should consider whether it would benefit their business in both the long- and short-term to begin with an REA. If the REA does not resolve the issue to the contractor’s satisfaction, an REA can always be converted to a claim.

Converting an REA to a claim requires compliance with FAR 52.233-1, which can be done by simply requesting that the contracting officer provide a final decision on its claim seeking “the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to this contract.” For contractors seeking money damages, “sum certain” is important. In general, the damages you seek must be fully quantified rather than an estimate or a starting point; however, provided you document your damages correctly, you can meet the sum certain requirement even for unmitigable future damages you have not yet incurred by submitting your quantified damages at the date of filing the claim, with an explanation of why and how those damages continue to grow each day the dispute is unresolved. Additionally, where damages are over $100,000, you must also provide the required written certification described by the FAR.

As stated above, whether you begin with a REA or claim is largely a matter of preference, but there are three key scenarios in which a contractor should consider skipping straight to a claim:

1. 1. The dispute is contentious, such that the contractor is sure the government will ignore or deny its REA.
   2. The government contracting team is typically slow to respond, such that the contractor needs the pressure of a claim—and the CDA interest that begins to accrue on the date the claim is filed—to keep the contracting team’s “feet to the fire.”
   3. The dispute is nearing the six-year statute of limitations, and the contractor needs to file the claim as soon as possible to preserve its rights.

2. Deal or Appeal

Once a claim is filed, the Contracting Officer (CO) typically has 60 days to either approve the claim and make a deal with the contractor or deny the claim and officially set the parties on the appeal path. The CO can seek a reasonable extension of that 60-day deadline, which is typically 30-45 days, but sometimes longer depending on the complexity of the dispute. For claims over $100,000, the CO has 60 days to respond to the contractor in writing and provide a reasonable future date by which the CO intends to issue its decision on the claim.

At the end of 60 days or upon the government’s stated reasonable future date, there will be one of three basic outcomes:

1. 1. the CO’s Final Decision (COFD) approves your claim;
   2. the COFD denies some or all of your claim and informs you of your right to appeal; or
   3. the CO does not issue a COFD, and the claim is considered a “deemed denial” which may be appealed the same way as a denied COFD.

When a contractor receives a COFD denying its claim or is faced with a deemed denial, it has only 90 days to appeal the decision to the BCAs. This is incredibly important. You do not want to end up before COFC by default, where contractors have one year to appeal the COFD or deemed denial, simply because you failed to timely appeal to the BCAs.

3. In It to Win It

There are three major things any government contractor can do at the outset of a CDA dispute to give its appeal the best shot once it gets to the BCAs:

1. 1. Timing is Key: There are three numbers you must keep in mind anytime you are facing a dispute: 6-90-1. You have 6 years from the date that you know you have a basis for a claim to file that claim, you have 90 days from the date that your claim is denied (or deemed denied) to appeal to the BCAs, and you have 1 year from the date that your claim is denied (or deemed denied) to appeal to COFC. Don’t lose out on money or the forum of your choice because you missed the deadline!
      
   2. Tell a Story: Every appeal is a story, and it’s important that the story you tell the BCAs is consistent and well-documented. It’s worth thinking about how your communications will tell your story in litigation. Work with your legal counsel to draft detailed REAs and claims; remember that everything you write in emails to the government or even your own colleagues may end up under a judge’s microscope a few months or years down the line; memorialize telephone calls with the government via emails so that there are records of important conversations; save all communications about the dispute in a separate folder; keep careful track of all costs associated with the dispute; etc. The more information you preserve for litigation, the more compelling your story will be once it’s before the BCA judge.
   3. Engage Legal Counsel Early: If the subject of the dispute or amount in dispute is important enough to your company that you’d be willing to file suit to recover it at some point in the future, you have nothing to lose and everything to gain by involving legal counsel early. If every appeal is a story and you’re the author, your lawyer is the editor poised to catch mistakes before you publish. There may be risks your counsel can identify at the outset and help you mitigate or avoid, additional damages you should seek that you may not have considered, or legal arguments you may inadvertently waive because you were not aware of them. Still not convinced? Consider the fact that your opponent—the government—typically has its own team of lawyers review the dispute long before issuing the COFD. If the CO is preparing for litigation the minute you submit your REA, you should be too.

Don’t miss next week’s blog as we offer a beginner’s guide to BCA decisions—from hearings to judgments on written briefings and accelerated/expedited appeals, the BCAs have a variety of methods to reach a decision on your CDA dispute. Should you have any questions regarding the BCAs, COFC, REAs, claims, appeals, or any other government contract dispute, please contact Lauren Brier, Josie Farinelli, Kelly Kirchgasser, or another member of PilieroMazza’s REAs, Claims, and Appeals or Government Contracts practice groups. 

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If you’re seeking practical insights to gain a competitive edge by understanding the government’s compliance requirements, tune into PilieroMazza’s podcasts: GovCon Live!, Clocking in with PilieroMazza, and Ex Rel. Radio.

[i] While REAs are referenced several times in the Federal Acquisition Regulations (FAR), it’s never formally defined. The Boards often cite the U.S. Court of Appeals definition of REA as a non-routine request for payment: “It is a remedy payable only when unforeseen or unintended circumstances, such as government modification of the contract, differing site conditions, defective or late-delivered government property or issuance of a stop work order, cause an increase in contract performance costs.” Reflectone, Inc. v. Dalton, 60 F.3d 1572 (Fed. Cir. 1995).