Construction contractors working under Government contracts need to understand the complexities of the claims process under the Contract Disputes Act (“CDA”), 41 U.S.C. §§ 7101–7109. Although more commonly it is the contractor making the claim against the Government, Contractors that face government claims need to be aware of the potential need to submit a contractor claim to perfect defenses against the government’s claim.
A brief review of the claims process under the Contract Disputes Act is instructive. The Government is generally immune from suit except where it has consented to be sued. The Contract Disputes Act, which grants jurisdiction to the Court of Federal Claims (“COFC”) and the agency boards of contract appeals over claims between contractors and the Government involving an express or implied contract for the procurement of property (other than real property). 41 USC Section 602(a)(1). The contractor must submit a written claim to the contracting officer for a decision. Section 605(a). If greater than $100,000, the claim must be certified by the contractor. Section 605(c)(1). Within 60 days of receiving a certified claim, the contracting officer must either issue a decision or notify the contractor of the time within which a decision will be issued. 41 USC Section 605(c)(2). The contracting officer shall issue his decision in writing, shall state the reasons for the decision and inform the contractor of its rights as provided in the CDA. Section 605 (a). If the contracting officer does not issue a decision within the required 60 days, the claim will be deemed denied and this will authorize commencement of an appeal of the claim. Section 605(c)(5).
A CDA claim must be submitted to the contracting officer for a final decision before it can be appealed. After the contracting officer issues a final decision on a claim, the contractor may appeal either to the board of contract appeals or to the CFC. 41 USC Sections 607(d) and 609(a)(1). The CFC has jurisdiction over the claim if the appeal is made within twelve months of the contracting officer’s final decision. Section 609(a). Appeals to the boards of contract appeals must be brought within 90 days of the contracting officer’s decision. Section 606.
The contractor is not the only party who can bring a claim. A government claim against a contractor can come in the form of a demand for liquidated damages, a termination for default, a demand for excess re-procurement costs, and/or a demand to recoup indirect costs for a violation of the cost accounting standards. Although contractors may have claims of their own in these instances, the fact that the Government strikes first does not excuse the contractor from following the proper procedures set forth in the Contract Disputes Act.
In the landmark decision of M. Maropakis Carpentry, Inc. v. United States, 609 F.3d 1323 (Fed. Cir. 2010), the Federal Circuit ruled that a contractor’s defense to a government claim for liquidated damages that alleged government caused delay had to be dismissed for lack of subject matter jurisdiction because the contractor had never submitted the defense as an affirmative claim properly certified under the Contract Disputes Act, 41 U.S.C. Section 7103 et. seq. The Court analyzed each communication between Maropakis and the government, finding “none of them, either alone or in combination, contained a clear and unequivocal statement sufficient to qualify as a claim.” Id. The Court emphasized that “[a] claim cannot be based merely on intent to assert a claim without any communication by the contractor of a desire for a contracting officer decision.” (citations omitted). Maropakis stated that even if it was not in technical compliance with the CDA, the government still had actual knowledge of the amount and basis of its claim. The Court maintained that “there is nothing in the CDA that excuses contractor compliance with the explicit CDA claim requirements.” Id.
The Maropakis decision illustrates the strict compliance requirements of the Contract Disputes Act. Later decisions have sought to clarify the limits of these requirements in situations where contractors are faced with defending against claims made by the Government. In Sikorsky v. United States, 102 Fed. Cl. 38 (2011) the Court of Federal Claims held that this rule did not apply to common law defenses such as satisfaction, waiver, laches or the statute of limitations. However, in 2014, in TPL, Inc. v. U.S., 2014 WL 4628311 (Fed. Cl. Sept. 16, 2014) the Court of Federal Claims held that the Maropakis rule applied to defenses of impracticability, mutual mistake, unconscionability, and defective specifications.
A slew of recently decided cases have placed even further limitations on the Maropakis decision. In Total Engineering, Inc. v. U.S., 120 Fed. Cl. 10 (2015) the Court of Federal Claims held that a defense of defective specifications did not need to be separately filed as an affirmative claim. Total Engineering involved a contract for construction of the United States Army Medical Research Institute of Chemical Defense Replacement Facility located at the Aberdeen Proving Grounds in Edgewood, Maryland. The contract required Total to perform a variety of work, including constructing a new steam line system. Following a hydrostatic pressure test, cracking appeared in the piers, among other defects. Total alleged that the defects were the result of the government’s faulty pier design and drawings. Meanwhile, the government prepared a report which found that the cause of the construction failures was due to Total’s deficient work. The CO issued a cure letter to Total followed by a change order requiring Total to cease construction of the steam line. The Agency then issued an RFP for the amount of a deductive credit. After the parties could not agree on the amount of the deductive credit, the Agency terminated the contract for default. In his Final Decision, the CO demanded payment in the amount of $2,301,209 “representing the decrease in the Contract amount that Total would have spent to render the Steam Line operable.” Total filed suit and the government moved to dismiss on the grounds that Total’s defective specifications defense to the Government’s claim for a deductive credit as an independent contractor “claim” that must have been submitted to the Contracting Officer. In denying the government’s motion, the Court held that contractor was not required to submit its defense to the Government’s claim for a deductive credit to the CO as a “claim” where it is not seeking any separate monetary relief or contract adjustment.
Palafox Street Associates, L.P. v. United States, 122 Fed.Cl. 18 (2015) involves the construction and lease of a federal courthouse. The GSA attempted to collect on an alleged excess obligation of $824,416.01 that the government paid to cover Palafox’s real estate taxes. After the contracting officer issues a final decision in which it found that the government was entitled to be reimbursed on the amounts sought, Palafox appealed the decision to the CBCA, after which the GSA moved to dismiss for Palafox’s failure to submit a certified claim pursuant to the Contracts Disputes Act. The Court ultimately held that, unlike the claim at issue in Maropakis, “Palafox’s ‘claims’ of estoppel, waiver, laches, and statute of limitations do not seek an adjustment of contract terms. Rather, the affirmative defenses of estoppel, waiver, laches, and the statute of limitations ‘are traditional common law defenses that are independent of the means by which a party seeks equitable adjustment to a government contract.’” (citations omitted).
Most recently, in Jane Mobley Assocs., Inc. v. General Servs. Admin., CBCA 2878, 2016 WL 73878 (Jan. 5, 2016), the Civilian Board of Contract Appeals rejected the GSA’s argument that the contractor’s defenses were in fact CDA claims that had not properly been submitted to the contracting officer for final decision, holding that “the rule of Maropakis is inapplicable where the contractor’s defense does not seek an adjustment of contract terms.” The CBCA instruceted that where the contractor is defending against a government claim but not asserting its own claim for relief, or is asserting ordinary common law affirmative defenses, the contractor is not seeking adjustment of contract terms and therefore is not asserting a CDA claim.
The CBCA cautioned against an expansive interpretation of Maropakis, staing “[i]n the CDA context, if we were to apply the rule of Maropakis to any defense raised by a contractor in response to a government claim that is not in the nature of an adjustment of contract terms or not seeking separate monetary relief, the “drastic consequence” could well be that the contractor’s appeal is never able to be heard on the merits. This is contrary to the intent and purpose of the CDA. “The CDA does not require the contractor to jump through such an extra hoop and refile its defense to a Government claim as a so-called contractor’s ‘claim’ where it is not seeking any separate monetary relief or contract adjustment.” (citing Total Engineering, 120 Fed. Cl. at 15).
This confusing and evolving area is full of risk for the unwary government contractor. A detailed review of all defenses to a government claim should be made as soon as possible to determine if the contractor needs to file a separate affirmative claim to protect existing defenses against a government claim.