Government Contract Attorneys, SDVOSB Law: Government Contracts Attorneys | Lawyers

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)

Government Constructively Terminated Contract for Convenience

On April 10, 2017, in Dream Management, Inc. v. Department of Homeland Security, CBCA 5517, the Civilian Board of Contract Appeals ("Board") ruled that the Department of Homeland Security, Immigration and Customs Enforcement ("ICE") cannot end a contract without relying on the termination for convenience clause. The contract called for language services. ICE did not order any services under the contract for an extended period of time, however. Meanwhile, the contractor had hired the necessary staff to fulfill the contract requirements and was incurring costs. ICE and the contractor ultimately signed a bilateral modification agreeing to end the contract early.

The contractor then sought breach of contract damages, or in the alternative, termination for convenience damages. ICE argued that the contractor had voluntarily agreed to end the contract by signing the modification and that this agreement should not be disturbed by the Board. The Board disagreed and held that "major deletions of contract work, however, may not be accomplished through modifications." As such, the modification was treated as a termination for convenience:

The bilateral modification to end performance of all work under DMI’s contract was, in effect, a termination for convenience. The task order explicitly incorporated the GSA terms and conditions, which included a termination for convenience clause. Because the modification did more than change part of contract performance, and the contract included a termination for convenience clause, the modification will be treated as a termination for convenience by the agency.

Because the bilateral modification did not include any release language, the Board also rejected the Government's claim that the contractor waived its rights to termination for convenience damages.

Given that the contract was terminated for convenience, the Board held that the contract could seek costs preparing for the work, even though no services were actually provided to the Government.

Oftentimes, the Government is faced with the need to end a contract due to budgetary or other reasons. There is a tendency to descope the contract by modification rather then terminated it for convenience (partially or fully) to reduce damages owed to the contractor. This case sends a strong message to the Government that it cannot descope a major portion of a contract and get away with paying termination for convenience damages.

 

Proposal Technically Unacceptable Because it Was Based on an Alternative Approach to Lifting Boat Out of Water for Dry-Dock Repairs

Antico Cantiere Del Legno Giovanni Aprea Di Cataldo S.R.L., of Sorrento, Italy ("Antico") submitted a quote for boat repairs to the Navy.  The Navy rejected its proposal as technically unacceptable because the method for lifting the boat out of the water differed from the dry-docking procedures set forth in the solicitation.  Specifically, the solicitation stated that the "[t]he craft will be removed [from the water] thru the use of a boat ramp and winch heaving system.” Antico planned on vertically removing the boat from the water with a boat travel lift.

Antico argued that its dry-docking procedures were preferred and that use of an inclined slipway hauling system was “obsolete,” “lacking of approved technical, engineering & safety certifications issued by the competent Italian Port Authorities,” and “known to transfer a great amount of undesired tensional stress [to] the boat’s wooden hull and superstructure elements.”

Even if Antico's dry-docking procedures were better than what was specified in the solicitation, the GAO held that it will not disturb the Agency's determination of its needs. Further, if Antico felt that the requirements were unduly restrictive it should have protested before the closing date for quotes.  In this regard, the GAO stated:

Antico does not dispute that its proposed dry-docking procedures were not those required by the solicitation. Rather, the protester argues that its alternate approach was preferable to--in fact, better than--those required by the RFQ. Contracting agencies, however, have broad discretion to determine their needs and the best way to meet them.4 See, e.g., Trandes Corp., B-411742.4, Feb. 22, 2016, 2016 CPD ¶ 61 at 6; URS Fed. Support Servs., Inc., B-407573, Jan. 14, 2013, 2013 CPD ¶ 31 at 4. Here, the RFQ’s dry-docking requirements were unambiguous. To the extent Antico believed that these requirements were improper, or that vendors should have been permitted to propose alternate drydocking approaches, it was required to challenge this perceived solicitation defect prior to the closing date for receipt of quotations. See 4 C.F.R. § 21.2(a)(1); DOER Marine, B-295087, Dec. 21, 2004, 2004 CPD ¶ 252 at 4 n.3. A vendor simply cannot wait until after award to dispute the merits of solicitation requirements with which it disagrees. The protest is denied.

The lesson learned here is not to wait until award to contest a solicitation requirement.  You must do so before proposals are due.

Antico Cantiere Del Legno Giovanni Aprea Di Cataldo S.R.L. , B-414112 (February 21, 2017)

 

 

CBCA Awards Contractor $904,575.00 in Restocking Fees

In the appeal of Paradise Pillow, Inc. CBCA 5179 (February 1, 2017), the Civilian Board of Contract Appeals awarded a contractor $904,575.00 in restocking fees for blankets ordered by the GSA after a hurricane in New Jersey, but later returned because they were not needed.  At first, the Contracting Officer agreed to pay the restocking fees and even signed a bilateral modification totaling $904,575.00.  However, the GSA would later dishonor this modification and terminated the contract for default instead because the blankets were allegedly not delivered on time.  The contractor appealed the termination for default and won.  The Board held that the GSA could not prove that the contractor did not meet the delivery deadline.  The termination for default was therefore converted to a termination for convenience.

Next, came monetary damages for the termination for convenience.  The GSA argued that restocking fees were expressly prohibited by the contract because it included the terms, “RESTOCKING: Not Applicable.”  The Board held that this language did not prevent the parties from agreeing, as they did, that restocking fees were “fair consideration” for the termination costs.  The Board noted that the contractor incurred the cost of “accumulating 150,000 blankets, delivering them to specified locations on short notice and under difficult conditions in the wake of a hurricane, maintaining the blankets in trailers at locations for several weeks, retrieving the blankets, and restocking the blankets in the warehouse.”  Under these circumstances, the Board held that the restocking fees were reasonable and the Contracting Officer had authority to pay them.  The GSA must therefore honor the modification in which it previously agreed to pay $904,575.00 in restocking fees.

The Board's decision preserves the integrity of our procurement system.  When signing a bilateral modification, absent fraud or misrepresentation, both parties are bound by its terms.

Final Payment Did Not Bar Filing of a Claim

 

On December 21, 2016, in the appeal of AHTNA Environmental, Inc. v. Department of Transportation, CBCA No. 5456 (December 22, 2016), the Civilian Board of Contract Appeals held that final payment did not prevent a contractor from filing a claim. The Board found that the Contracting Officer "had or should have had" a full understanding of the scope and amount of the contractor's anticipated Claims before making final payment.  As such, the Government cannot rely on the release in preventing the contractor from pursuing a claim after final payment. In this regard, the Board held that:

A tribunal may decline to find that a claim is barred by release “where the parties continue[d] to consider the claim after execution of a release.” Community Heating & Plumbing Co. v. Kelso, 987 F.2d 1575, 1581 (Fed. Cir. 1993) (citing Winn-Senter Construction Co. v. United States, 75 F. Supp. 255, 260 (Ct. Cl. 1948)). “Such conduct manifests an intent that the parties never construed the release as an abandonment of plaintiff’s earlier claim.” Id. (quoting A& K Plumbing & Mechanical, Inc. v. United States, 1 Cl. Ct. 716, 723 (1983)). Where the Government continues to review, consider, and negotiate the contractor’s claim for a significant period of time after the supposed release, the release will generally be found not to bar the claim. Id.; see J.G. Watts Construction Co. v. United States, 161 Ct. Cl. 801, 807 (1963) (“where the conduct of the parties in continuing to consider a claim after the execution of the release makes plain that they never construed the release as constituting an abandonment of the claim, . . . the release will not be held to bar the prosecution of the claim”).

In summary, the Board's correctly rejected the Government's attempt to strip the contractor's right to file a claim for two basic reasons. First, at the time of final payment, the Government was clearly on notice that a REA would be filed.  Second, once the REA was filed, the Government evaluated it and did not invoke a release defense.

Supreme Court Rules that a Lawyer’s Improper Public Disclosure Does Not Mandate Dismissal of False Claims Act Case

Plaintiffs, Cori Rigsby and Kerri Rigsby, filed a False Claims Act complaint, alleging that State Farm attempted to defraud the Government through the National Flood Insurance Program by categorizing Hurricane Katrina wind damage as flood damage. The Plaintiffs filed the complaint under seal as required by the Qui Tam rules. This meant that the Complaint could not be publicly disclosed until the Government decided whether to take on the case itself.

State Farm asked the Supreme Court to hear its appeal to dismiss the False Claims Act case because Plaintiffs' lawyer publicly disclosed facts about the case to news reporters. The Supreme Court held that this public disclosure, even though in violation of the court seal, did not automatically result in dismissal of a Qui Tam action. The Supreme Court cited the Fifth Circuit’s approach that “no provision of the False Claims Act explicitly authorizes,” much less requires, “dismissal as a sanction for disclosures in violation of the seal requirement.” Lujan, 67 F.3d at 245; Smith, 796 F.3d at 430. The Supreme Court’s decision thus leaves it to the lower courts to determine if dismissal of a Qui Tam case is appropriate. One factor would be whether the improper public disclosure has prevented the Government from performing its own investigation of the case.

STATE FARM FIRE AND CASUALTY COMPANY, Petitioner, v. UNITED STATES OF AMERICA, EX REL. CORI RIGSBY; KERRI RIGSBY, United States Supreme Court, No. 15-513 (November 20, 2017)

 

 

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