The U.S. Court of Appeals for the Federal Circuit recently rejected an appeal by the contractor Daewoo Engineering & Construction Company (“Daewoo”) of an order of the Court of Federal Claims awarding the government approximately $50 million for Daewoo’s violation of the Contract Disputes Act, 41 U.S.C. § 604.

Daewoo had brought suit in the Court of Federal Claims against the government, alleging breach of a contract to build a road in the Republic of Palau. Daewoo’s original bid amount, accepted by the government, was $88.6 million. After a series of delays, which Daewoo attributed to weather and to the government’s allegedly defective specifications, Daewoo submitted a certified claim for equitable adjustment in the amount of $64 million.

The trial court found that at least $50 million of the certified claim was submitted in bad faith and was fraudulent as insufficiently supported by facts or expert testimony. The trial court determined that the claim included duplicate costs, overstated equipment costs and overstated rates, and further concluded that the amount of the claim was essentially a “negotiating ploy” designed to get the government’s attention.

Accordingly, the trial court awarded the government $50 million under the provision of the Contract Disputes Act, 41 U.S.C. § 604, which states that “[i]f a contractor is unable to support any part of his claim and it is determined that such inability is attributable to misrepresentation of fact or fraud on the part of the contractor, he shall be liable to the Government for an amount equal to such unsupported part of the claim.” Finding no error in the trial court’s ruling, the Court of Appeals upheld the $50 million award.

Daewoo Engineering & Constr. Co. v. United States, 557 F. 3d 1332 (Fed. Cir. 2009)