CBCA Expands its Approval of Subcontractors’ “Sponsored” Claims

March 31, 2016

Typically, a subcontractor cannot appeal a Contract Disputes Act (“CDA”) claim to the Civilian Board of Contract Appeals (“CBCA”) because the subcontractor lacks privity of contract with the government.

However, the CBCA allows subcontractors’ claims to be “sponsored” by the prime contractor, whereby the prime contractor files a CDA claim on behalf of the subcontractor, and later appeals it to the CBCA. Thus, even if the subcontractor is the party who has been damaged by the subject matter of the claim, it must be filed by the prime contractor, as the prime contractor has a contractual relationship with the government.

In 2015, the CBCA permitted an appeal of a CDA claim that was filed in the name of the prime contractor but was filed by the subcontractor. In Cooley Constructors, Inc., CBCA No. 3905, 15-1 BCA P 36001, Cooley Constructors, Inc. (“Cooley”) held a contract with the General Services Administration (“GSA”). Cooley filed a request for equitable adjustment on behalf of its subcontractor, Delaware Elevators, Inc. (“Delaware”), which was denied by the GSA.

Thereafter, Cooley authorized Delaware to file an appeal to the CBCA. Delaware’s chief financial officer filed a notice of appeal with the CBCA, and stated on the notice of appeal that Cooley was the prime contractor. After the CBCA, at the request of GSA, ordered Cooley to file a notice of appearance, an attorney entered an appearance as counsel for Cooley.

GSA then filed a motion to dismiss the appeal, asserting that the notice of appeal was defective because it was filed by a representative of the subcontractor and not the contractor. The CBCA disagreed, and held that Delaware, as a subcontractor, properly filed the notice of appeal in the name of the prime contractor. The CBCA noted that the prime contractor had explicitly authorized the subcontractor file to the appeal.

Additionally, it noted that the subcontract between Cooley and Delaware authorized the subcontractor to file claims in the name of the prime contractor. Accordingly, the CBCA held that “[t]he filing of the notice of appearance by [Cooley’s] attorney affirmed the prior authorization by the prime contractor to the subcontractor to file the appeal, rather than ratifying an act that previously lacked authorization.”

Thus, the CBCA’s decision makes it easier for a subcontractor to pursue a sponsored or pass through CDA claim, as long as the subcontractor has the express authorization of the prime contractor. If a subcontractor wants the option of pursuing a CDA claim on its own, it would be best to ensure that the disputes clause of the subcontract allows for the subcontractor to make claims against the government.  And while many prime contractors likely will still prefer to be involved in any claims their subcontractors wish to pursue, the CBCA appears to have made this process easier for subcontractors’ sponsored claims.

About the Author: Julia Di Vito practices in the areas of government contracts, litigation, employment, and labor. She may be reached at jdivito@pilieromazza.com.

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