In Kellogg Brown & Root Services, Inc. v. Murphy, Kellogg Brown & Root Services (KBR) filed a claim with the Army to recover costs associated with a subcontractor’s work on a dining facility in Iraq. The Army denied the claim and KBR appealed to the Armed Services Board of Contract Appeals (the Board). On the Army’s motion, the Board dismissed the claim, finding the six-year statute of limitations under the Contracts Dispute Act (CDA) had expired. KBR appealed to the Federal Circuit, which reversed the Board’s decision, finding the claim did not accrue, and thus the limitations period did not begin to run, until KBR had a basis for a “sum certain” to “fix” its liability.
Under a cost-plus-award-fee contract with the Army, KBR subcontracted work to the joint venture of KCPC/Morris. KBR later terminated the subcontract for delay and KCPC/Morris stopped work on September 12, 2003. On January 24, 2005, after KCPC/Morris had filed suit against KBR, the parties entered into a settlement agreement that liquidated a portion of KCPC/Morris’ claim. On the remainder of the claim, the parties agreed to cooperate to submit an invoice to the government.
On August 26, 2006, KCPC/Morris certified a claim to KBR for the remaining costs, which KBR forwarded to the Army. The Army refused to consider the information, instructing KBR to “settle a claim by its sub with the sub, then bill the government.” Following another KCPC/Morris suit against KBR for allowing the claim to “languish,” the parties settled for $10,464,493. On May 2, 2012, KBR certified a claim for this amount to the Army and received a “deemed denial” when the contracting officer failed to act. KBR appealed to the Board.
In dismissing the claim under the CDA’s six-year statute of limitations, the Board found the claim had accrued on September 12, 2003, when KCPC/Morris stopped work, and alternatively on January 24, 2005, when the parties agreed to cooperate to present an invoice to the Army. Either way, KBR’s May 2, 2012, claim was beyond the six-year limitations period.
The Federal Acquisition Regulation (FAR) defines “accrual” as the date when liability is sufficiently “fixed” to permit assertion of a claim. Here, the Board reasoned that liability was fixed on September 12, 2003 or January 24, 2005, because, by those dates, KBR at least knew the type of costs included in the claim. KBR argued against this reasoning, pointing to the FAR definition of a “claim” as an assertion seeking payment of money in a “sum certain.” Until KCPC/Morris submitted its certified claim on August 26, 2006, KBR had no basis for determining the amount of its claim.
The Federal Circuit agreed with KBR. Among other reasons, and despite additional arguments from the Army about KBR’s termination of the subcontract, the Court pointed to the Army’s letter requiring KBR to resolve its disputes with KCPC/Morris before presenting a claim. The court cited prior case law holding that the limitations period does not begin to run if a claim cannot be filed because of mandatory pre-claim procedures. In essence, even the Army acknowledged the claim needed to be sufficiently “fixed” and in a “sum certain” before KBR could properly submit it. The court remanded KBR’s claim to the Board, allowing it to proceed.
Timeliness is critical when submitting claims to the government, or any contracting party, for that matter—public or private. But, as this case demonstrates, the law does not compel contractors to bring claims prematurely. The key is recognizing when the claim has ripened and the clock has begun to tick.