You are a GSA schedule contractor. You receive an order from an agency and during the course of performance get into a dispute over some of the terms of the contract as well as the price. You intend to file a claim under the Contract Disputes Act. Where does it go? Is the claim filed with the agency CO or is it filed with the GSA CO? Does it matter?
According to a recent decision by the Court of Appeals for the Federal Circuit, it certainly does. The case is Sharp Electronics Corporation v. John McHugh, Secretary of the Army. The story follows…
The GSA Schedule Contract
In September 2001, Sharp Electronics Corporation (“Sharp”) and GSA entered into a schedule contract for the lease or purchase of office equipment and supplies from Sharp’s Schedule Price list. In December 2005, the Army issued a delivery order for a four-year lease of copier equipment. The lease consisted of one Base Year and three Option Years. Army exercised Option year one and two. In Option year three, Army and Sharp executed a Modification under which option year three was partially executed for six months. The parties executed one additional Modification for three months. No further Modifications occurred.
Sharp viewed the Army’s failure to exercise the third option year as a premature cancellation. As a result, Sharp determined that it was entitled to termination fees under the termination provisions of the schedule contract. In January 2011, Sharp filed a formal claim with the Army CO. The Army CO did not respond. Sixty days later, Sharp appealed the “deemed denial” of its claim to the Armed Services Board of Contract Appeals (“ASBCA”).
The ASBCA determined that it did not have jurisdiction over the matter and dismissed the appeal. Sharp appealed to the Federal Circuit.
ASBCA found that the primary issue in the appeal was not the merits of the appeal, but whether the ASBCA had jurisdiction to hear the appeal. ASBCA reasoned that the issue in the appeal was the applicability of the terms and conditions of the Schedule Contract – i.e. the termination for convenience provisions – and not performance under the delivery order. ASBCA held that because the dispute was over terms and conditions, it should have been brought to the GSA CO NOT the Army CO. Because the dispute was brought to the wrong forum, the Army CO lacked authority to resolve the dispute and as a result ASBCA dismissed the appeal.
Sharp appealed to the Federal Circuit who agreed with the ASBCA. In its decision, the Federal Circuit interprets FAR 8.406-6
The Federal Circuit’s Decision and Guide for Government Contractors
Contract disputes for schedule contractors are split between the ordering agency CO and the GSA CO. Where the dispute is filed depends on the subject of the dispute. (FAR 8.406-6)
Ordering CO hears disputes over performance of schedule orders
GSA CO hears disputes over interpretation of the schedule contract – i.e. interpretation of terms and conditions
If the dispute is mixed and involve issues of performance and interpretation, it is heard by the GSA CO
The Ordering CO can interpret commonly disputed terms as long as it does not involve interpretation of the schedule contract, such as:
Specifications of the order
Permissible variation in quality or quantity
Hours and location of delivery
Discounts from schedule pricing
And, the Ordering CO resolving a dispute can apply relevant provisions of the schedule contract as long as the meaning is undisputed.