Contractor Entitled to “Delay Overhead Costs” Under VA Changes Clause
The Civilian Board of Contract Appeals ruled that a contractor is not only entitled to overhead and profit on change order work under the VA's Changes Clause, but also to overhead and profit on other work that was impacted or delayed by the change order work. Appeal of Industrial Maintenance Services, Inc., CBCA No. 5618 (September 15, 2017) This is new precedent and could change the way we calculate impact costs. Impact costs stem from a change's impact on unchanged work. For example, a change in the HVAC duct work might impact or delay electrical work that cannot be completed until the HVAC duct work is done. In such a case, the Board ruling would allow the contractor to apply overhead and profit on the value of the electrical work as the appropriate measure of impact costs or "delay overhead":
However, in seeking delay overhead, the contractors did not raise and opinions have not addressed or recognized that in terms of dollars, the actual scope of the underlying change extended beyond the dollar value of work added, altered, or deleted. As is apparent in this case, with the critical path of performance affected, the impact of the change reached beyond the immediate work modified, and the impacted work is just as much a part of the change as the actually added and altered work. The dollar value of the impacted work is an element of the costs of the modified work. It is from that total amount that the overhead and fee percentages must be calculated to properly compensate the contractor for its costs not recoverable as direct costs.
This decision is interesting and could have a wide sweeping impact on how one calculates impact costs, at least with respect to VA contracts. Note that contractors can still seek delay damages under the suspension of work clause, if a particular change suspends performance. Careful review of the modes of recovery should be looked at to ensure compensation is fair and reasonable.
Contracting Officer Cannot Give Himself More Time to Issue a Final Decision
In the Appeal of CTA I, LLC, we filed a petition requesting that the Civilian Board of Contract Appeals direct the Contracting Officer to render a final decision under the Contract Disputes Act (“CDA”). CTA filed a CDA claim on February 15, 2017 for delay, labor inefficiencies, and related costs. The Contracting Officer was supposed to issue a final decision within 60 days, but stated that “due to the size and complexity of the claim documentation, our office will respond to your request for a Contracting Officer’s final decision by 10 July 2017.” That did not happen. Just prior to July 10th, the Contracting Officer stated that “to allow the claims consultant adequate time to assess the validity of the claim, I will respond to your request for a Contracting Officer’s final decision by 8 September 2017.”
CTA filed a petition with the Board of Contract Appeals because it lack confidence that the Contracting Officer would issue a final decision by September 8, 2017. In its petition, CTA stated that “the VA is engaged in bad faith delaying tactics” and is causing CTA and it subcontractors financial harm. The Board explained that under the Contract Disputes Act, the Contracting Officer could only give himself one time extension to issue a final decision. If a final decision is not issued by that extended deadline, he cannot give himself another time extension. The Board therefore held that CTA could immediately file an appeal based on a deemed denial. CTA did so the next day.
Does this case sound familiar? Often times, Contracting Officers will delay issuing a final decision. Meanwhile, the contractor must carry the financial burden of fronting the cost of additional work and delays. This case sends a clear message to Contracting Officers that they cannot give themselves multiple extensions of time in which to issue a final decision. Hopefully, this will help reduce the time it takes to adjudicate claims under the Contract Disputes Act.
CTA I, LLC v. Department of Veterans Affairs, CBCA No. 5800 (August 22, 2017)
