5 Things Every Contractor Should Know About the Contract Disputes Act

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PilieroMazza PLLCThe well-worn adage that “you can’t fight City Hall” does not apply to federal government contractors.  The Contract Disputes Act (CDA) provides the statutory framework governing contract disputes between contractors and the government.  Although its embodied in every government contract, its seemingly endless nuance and nearly 50 years of case law interpretation, can leave even the most experienced contractor confused at times.  To prevent further confusion around the CDA, attorneys from PilieroMazza’s Government Contract Claims & Appeals Group offer five simple tips every government contractor should know about the CDA.

  1. CDA Claims Above $100,000 Must Be Certified

The CDA requires that any claim above $100,000 include a certification that “the claim is made in good faith, that the supporting data are accurate and complete to the best of [the contractor’s] knowledge and belief, that the amount requested accurately reflects the contract adjustment for which the contractor believes the government is liable, and that the certifier is duly authorized to certify the claim on behalf of the contractor.”[1] 

Contractors must take this certification requirement seriously.  To satisfy the completeness requirement, supporting data generally should include sufficient information that allows the contracting officer to make an informed decision, potentially forcing the contractor to strike a delicate balance between providing sufficient information and supplying all possible supporting information.  The best practice is to provide the contracting officer with enough information so they can trace how the contractor came up with the numbers supporting its damages.

To satisfy the good faith requirement, contractors should ensure their theory supports the full amount of the claim.  The amount should not be an inflated negotiating position, but rather an appropriate starting place in a commercial contract dispute.[2] 

  1. CDA Includes Multiple Ways to Streamline Claims

The CDA process often presents a daunting timeline, especially when compared to the accelerated pace in which bid protests are resolved.  But that does not have to be the case for all claims.  The Boards of Contract Appeals (the Boards) have accelerated procedures available for claims of $100,000 or less.[3]  The accelerated claims must be resolved within 180 days.  The Boards also have simplified procedures for small claims—up to $150,000 for small business concerns or up to $50,000 for any contractor.  The small claim appeal must be resolved “whenever possible, within 120-days.”[4]  Although, in exchange for an expedited decision, the contractor waives its appeal rights except in cases of fraud.

The contracting officer is authorized to use alternative means of dispute resolution, including conciliation, facilitation, mediation, minitrials, or arbitration.  The Boards and the Court of Federal Claims (COFC) offer alternative dispute resolution programs, including mediation and arbitration.  The use of these procedures is voluntary and must be agreed on by both parties and can provide a more efficient path to resolution.

  1. CDA Claims Require a Sum Certain

The FAR defines a “claim” in relevant part as “a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain . . . .”[5]  The FAR requirement that a claim demand a “sum certain” serves to provide the parties with notice of the amount of the claim.  Although the plain language implies that the contractor must be able to provide a fixed number to assert a claim for damages, that is not always the case.

The COFC and the Boards found that the “sum certain” requirement is met if the contracting officer can determine the amount claimed with a simple mathematical calculation.[6] Therefore, a contractor seeking to recover costs under the CDA must ensure that its monetary claims assert an outright, and easily discernible, “sum certain” or exact dollar amount of the overall damages being claimed.  An easily discernible sum certain does not always require a precise dollar value.  The claim may include costs not yet incurred if the costs are unqualified and detailed.  That said, a contractor must avoid submitting a claim to recover damages that uses any form of qualifying language, i.e., “around” or “no less than” or “no more than” or the contractor risks dismissal of the claim as the Boards and COFC lack jurisdiction over claims where the amount requested is uncertain.

  1. Contractors Can Release Claims When Executing Contract Modifications

It is not enough for the contractor to be owed damages to recover damages under the CDA.  Agencies regularly reject otherwise meritorious CDA claims where the contractor signs a contract modification containing release language limiting the contractor’s ability to seek future time or costs for a contract under a CDA claim.  Such release language is often included in bilateral modifications tied to change orders or increase in funding modifications wherein the contracting officer will include standard release language to ensure the contractor cannot seek any future costs (beyond the modification) in exchange for the modification being executed.  To guarantee such release language does not impact a contractor’s ability to seek any and all future performance extensions or costs.  It is pertinent to review each contract modification to confirm such language is specifically limited in scope only to the modification being executed.  It is also imperative that before signing any modification, contractors confirm that the modification language reserves their right to submit any future requests for equitable adjustment and claims for time and costs tied to performance under the contract.

  1. Government Commonly Opposes CDA Claims Using Notice Failures

Agencies often oppose CDA claims arguing that the contractor failed to put them on adequate notice of the claim for time and costs. Such conduct is most common in fixed-price construction contracts as most contain standard notice requirements under FAR 52.243-4, which, for example, contain a 20-day written notice requirement to the contracting officer. Despite the agencies’ practice to reject claims for notice failures, depending on the circumstances, the lack of notice can sometimes be overcome if:

  1. the contractor can demonstrate the agency was not prejudiced by the failure to provide notice,
  2. evidence shows notice was given through other means, i.e., in verbal communications, or
  3. the parties engaged in negotiations concerning the claim notwithstanding the lack of notice.

Ultimately, to avoid opposition tied to notice failures, it is strongly recommended that contractors review their contract for any and all relative notice requirements and socialize those requirements, at the appropriate levels, to the program team. The better a contractor and their team knows the contract terms, the better position the contractor will be in when moving forward with a claim and thus avert losing it to technicalities and traps for the unwary.

[1] FAR § 52.243-1(c).

[2] Daewoo Eng’ring & Const. Co., Ltd. v. United States, 557 F.3d 1332 (Fed Cir. 2009) (affirming $50M counterclaim for fraud after witnesses admitted to filing the certified claim as a negotiating ploy).

[3] 41 U.S.C. § 7106(a). 

[4][4] 41 U.S.C. § 7106(b). 

[5] FAR § 2.101 (emphasis added).

[6] See, e.g. Modeer v. United States, 68 Fed. Cl. 131, 137 (2005); PHI Applied Physical Sciences, Inc., ASBCA Nos. 56581, 58038, 13 BCA ¶ 35,308.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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