Two recent decisions, one at the United States Court of Federal Claims, Structural Concepts, Inc. v. United States, 103 Fed. Cl. 84 (2012), and one at the Civilian Board of Contract Appeals, National Fruit Product Co., Inc., CBCA No. 2445, 12-1 BCA ¶ 34,979 have lessened the obstacles for a contractor seeking to challenge a government claim for liquidated damages. In most cases where the government is asserting liquidated damages against the contractor, the contractor need not file a separate affirmative claim for remission of liquidated damages, if the contractor has filed a proper government-caused delay or acceleration claim.
Court of Federal Claims Decision
In Structural Concepts, the contractor received an award to alter and repair a building for the Air Force. Upon completion of the project, the contractor filed a claim with the contracting officer for $1.2 million asserting that it was owed compensation for, among other reasons, governmentcaused delay. The contractor’s claim was denied in whole and the government assessed approximately $770,000 in liquidated damages. Upon denial of its claim, the contractor filed suit at the Court of Federal Claims claiming the same amount and remission of the liquidated damages. The government counterclaimed for the amount assessed as liquidated damages.
Moving for summary judgment, the government argued that the contractor’s claim for remission of liquidated damages should be denied on the basis that the contractor had not submitted a separate claim to the contracting officer requesting a specific number of days for which the contract would be extended as a defense to the assessment of liquidated damages. The court ruled that the contractor’s claim for remission did not fail at summary judgment. The government argued that the contractor must present a separate formal claim to the Contracting Officer for remission of liquidated damages. In making this argument, the government relied upon a recent decision from the Court of Appeals for the Federal Circuit, M. Maropakis Carpentry, Inc. v. United States, 609 F.3d 1323 (Fed. Cir. 2010), that held that a contract seeking an adjustment of contract terms must meet the jurisdictional and procedural requirements of the Contract Disputes Act (“CDA”). This requirement held for either an affirmative claim against the government or to present a defense to a government action. The contractor in Maropakis attempted to assert an excusable delay defense to the assessment by the government of liquidated damages on appeal. This was not allowed by the Federal Circuit because the contractor had not made its own claim for government-caused excusable delay to the contracting officer.
The government attempted to extend Maropakis to the extent that a contractor would be required to file a separate claim for remission even though it had filed a claim for excusable delay with the contracting officer. The Court of Federal Claims ruled that Maropakis did not apply to the contractor’s appeal because of this factual difference. Rather, the court looked to other precedent to rule that CDA claims in the court do not need to rigidly adhere to the language and structure of the original CDA claim presented to the contracting officer. Structural Concepts, 103 Fed. Cl. at 89. The court, rather than focusing on the procedural rigors, saw that the original claim and the claim in the court arose from the same operative facts, claimed the same relief and merely asserted differing legal theories for that relief.
In National Fruit Product Co., Inc., the contractor held a contract to supply fruit products to the national school lunch program. During the course of performance, the contractor failed to deliver the requirements of the contract. The government assessed liquidated damages in the amount of approximately $500,000 and withheld that amount from contract payments. The government later terminated the contract on a no-cost convenience basis. The contractor appealed the contracting officer’s final decision to the CBCA. At trial, the government primarily argued that National Fruit failed to submit a valid claim, specifically that the contractor failed to include proper claim certification and, by extension, that the contractor was required to file an affirmative claim for remission of liquidated damages after the government began to assess those liquidated damages. The board ruled that the contractor was not required to file any claim because the only dispute was with the imposition of liquidated damages by the government and that the contractor was not “seeking a compensable change or a contract modification.” Though the government argued that the appeal was not based on a certified claim, the board ruled that this was unnecessary as long as the appeal was taken from a contracting officer’s final decision of an affirmative government claim.
For contractors, these decisions slightly tip the balance of the claims process in their favor. Despite the government’s continual pursuit of its procedural argument, the Court of Federal Claims and the CBCA seem to be coming down on the side of practicality; that is, if the contractor has alleged facts in its initial claim related to excusable delay caused by the government, it will not have to file a separate affirmative claim for remission of liquidated damages. These decisions may save a contractor from serious problems if its claim to the contracting officer does not specifically make a claim for remission of liquidated damages.
From a practical standpoint, these decisions should not have a great impact on the typical delay claim filed by a contractor. If a contractor has experienced delay not clearly caused by the government, then almost certainly will the government assess liquidated damages. The prudent contractor, not to mention its attorney that is preparing a claim to be filed with the contracting officer, should recognize, as did the Court of Federal Claims and the CBCA, that remission of liquidated damages goes hand in hand with claims for government-caused excusable delay. While the court and the board have given contractors a bit of an escape hatch in the event that the contractor does not affirmatively request remission of liquidated damages in its formal claim, these decisions should not stand in the way of contractors submitting a comprehensive claim to the contracting officer encompassing both affirmative claims for delay along with requests for remission of any liquidated damages.