By Maj. Wes Hunnell, Esq., PMP, M.SAME, USAR, and Kevin Moczygemba, Esq., M.SAME
Sometimes, the most frustrating part of a construction contract is getting paid. Last year provided several important lessons for federal contractors on proper claim certification and the existence of differing site conditions.
There are some hard lessons learned for contractors that did not always recover payment, and others who eventually got paid, but still had to fight for it.
PROPER CLAIM CERTIFICATION
Among the first steps in recovering payment from the government is filing a proper claim certification with the contracting officer. For monetary claims over $100,000, the Contract Disputes Act requires that the contractor submit a certified claim to the contracting officer for a final decision. The “claim” must meet the requirements of Federal Acquisition Regulations Section 2.101. This means sending clear and explicit written notice to the contracting officer of the claim for “the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to the contract.” The contracting officer should respond with a final decision in 60 days, or provide an alternate time when a decision will be issued.
A contractor that fails to file a claim certification or files incorrectly limits their appeal of a contracting officer’s decisions. Additionally, if the claim is not submitted within six years of the date of the claim’s accrual, then the statute of limitations bars recovery. File the claim certification correctly and timely to avoid delaying payment and any unnecessary heartache.
For example, a government contractor building base-wide utilities at Bagram AB, Afghanistan, for the U.S. Army Corps of Engineers (USACE) just missed the six-year deadline to bring its claims for delay costs and constructive changes by the government because it failed to submit the claim to the contracting officer within six years of the claim’s accrual. The project was completed in 2012. The contractor submitted requests for equitable adjustments in both 2013 and 2014, but only filed a certified claim in February 2018. The government refused to pay the contractor and the case went to litigation.
Unfortunately for the contractor, the court found that the claim accrued in August 2011 at the latest, when the last constructive change occurred. The court held the claim was time-barred because it must be filed within six years of accrual—the August 2011 date—and not six years from contract completion.
An improper claim certification can often be cured even if it delays payment recovery—but a long enough delay can completely bar recovery by putting a contractor outside the statute of limitations.
There are a couple of lessons. First, pay attention to when a claim accrued and not when the project was completed. Multi-year contracts create an easy situation to miss the deadline. An improper claim certification can often be cured even if it delays payment recovery—but a long enough delay can completely bar recovery by putting a contractor outside the statute of limitations. Second, do not rely on requests for equitable adjustment to serve as a written claim for certification. The Federal Acquisition Regulation states that a “voucher, invoice, or other routine request” such as a request for equitable adjustment is not a claim. Subsequent notice to the contracting officer can convert a request for equitable adjustment to a claim certification. Yet that did not happen in this case. In short, do not sit on a claim certification and consider involving legal counsel once issues arise, as claim accrual often involves a complicated legal and factual analysis.
The claim also must comply with other statutory requirements, including that it must be for a “sum certain.” The Armed Services Board of Contract Appeals (ASBCA) refused to hear a claim for “at least $15,033,862” because the “at least” language created uncertainty. As the board explained, “qualifications to a numerical amount, such as the use of the word ‘approximately,’ ‘no less than,’ or ‘well over’ prevent its consideration as a sum certain.” Accordingly, provide a claim for an exact amount without any qualifying language.
Finally, an email signature block is now an acceptable signature for submitting a claim. In September 2020, the ASBCA Senior Deciding Group issued an opinion to permit an email signature block to count as a signature for claim certification. Previously, an email was not sufficient. Outlining the requirements, the group noted that an email signature is acceptable if it includes a discrete symbol purporting to be a signature, if the symbol is verifiable, and if the symbol indicates the intention to authenticate.
DIFFERING SITE CONDITIONS
Differing site conditions are a classic source of dispute. Most government contracts will accept the risk of differing site conditions and permit the contractor to request an equitable adjustment if found. However, a dispute can arise as to whether differing site conditions exist at all.
ASBCA found that host nation difficulties with the local populace are not considered “differing site conditions.” A USACE contractor was tasked to build an Afghan National Police district headquarters in Paktika Province. However, the Afghan National Police had established a checkpoint on the site and refused to leave. Additionally, USACE did not get permission to tear down a wall on the site. The contractor argued it was entitled to the delay costs because both factors constituted “differing site conditions.”
The board disagreed, explaining that the contractor did not show these factors were not “physical conditions that [the contractor] could not anticipate from the terms of the contract, at the time of bidding.” In short, ASBCA put the risk on the contractor for identifying non-physical conditions at the site. For overseas contingency contracting, this is potentially a huge risk. Many countries are a patchwork of tribal affiliations. Local support for the United States can differ from town to town.
Similarly, ASBCA did not grant any relief for host nation interference. On a project in Djibouti, a contractor had a Naval Facilities Engineering Systems Command contract to provide host nation labor. The Djibouti government encouraged a local labor strike and refused entry into the country for the supplemental labor from third-party countries, which disrupted the contractor’s ability to perform.
Closer to home, ASBCA denied a contractor’s appeal to recover the costs associated with providing role-players at the National Training Center due to changes in complying with California’s wage laws. Once more, the board found the contractor assumed the risk with a firm-fixed-price contract.
ASBCA found that the Navy was not liable for third-party acts, and the contractor assumed the risk in the contract. Similarly, when the Republic of Korea raised its minimum wage, the board found that the Army contractor bore the risk of wage increases in a firm fixed-price contract. Yet again, the contractor bore the risk of host nation interference.
Closer to home, ASBCA denied a contractor’s appeal to recover the costs associated with providing role-players at the National Training Center due to changes in complying with California’s wage laws. Once more, the board found the contractor assumed the risk with a firm-fixed- price contract. The takeaway for any contractor is to be aware of the demographic conditions and political atmosphere on the ground, especially in a firm-fixed- price contract. These are risks that the contractor likely assumes.
BEING MORE AWARE
Amid the many challenges of the pandemic in 2020, on the litigious front, the year also highlighted several hard lessons for federal contractors that were not careful with their government contracts.
By being more aware of others’ challenges and how those organizations approached or did not approach resolving them, you can help avoid the same obstacles, meet your project’s objectives, save time and resources, and get paid.
Maj. Wes Hunnell, Esq., PMP, M.SAME, USAR, is Construction Attorney, and Kevin Moczygemba, Esq., M.SAME, is Construction Attorney, Cokinos | Young. They can be reached at email@example.com; and firstname.lastname@example.org.
[This article first published in the July-August 2021 issue of The Military Engineer.]