Welcome back to our “Lifecycle of a Claim” series. This series explores the Contract Disputes Act claims process, with practical guidance stemming from recent case law every step of the way.
This series walks through this infographic (click here or the image below to expand), which illustrates the lifecycle of a typical claim:
Click here to read our first post (covering Steps 1 and 2 of the infographic). This post focuses on Steps 3 and 4 of this process: submitting a request for equitable adjustment (“REA”) and negotiating the REA with the contracting officer.
Terminology Defined: What Is the Difference between an REA and a Claim?
There are two primary methods for pursuing a contract adjustment following a change: submitting an REA or filing a claim.
- REA: A request (rather than a demand) to negotiate with the contracting officer to adjust the contract for price, time, or other terms. There is no FAR definition of an REA but generally an REA does not expressly or implicitly request a contracting officer’s final decision (“COFD”) or contain the FAR 33.207(a) certification.
- Claim: 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, the adjustment or interpretation of contract terms, or other relief arising under or relating to the contract.” FAR 2.101; FAR 52.233-1(c).
The following chart depicts the key differences between an REA and a claim:
(Click to expand)
It is important to note that there are no “magic words” that distinguish an REA from a claim, and a Court or Board may find that certain communications by a contractor represent “an implicit request for a final decision.” Zafer Constr. Co. v. United States, 40 F.4th 1365 (Fed. Cir. 2022). As discussed below, contractors pursuing an REA must “carefully avoid[ ] making a request—explicit or implicit—for a CO’s final decision.” Id.
Why Might an REA Be Advantageous?
Depending on the circumstances, an REA may be advantageous for the following reasons:
- Informal Process: While there is typically a notice requirement pursuant to whichever FAR clause provides a basis for relief (g., the Changes clause) (see our prior post here for details), there is not a formal process for REA resolution once submitted. The informal process and lack of strict deadlines can be less adversarial than a claim, which may preserve the relationship with the contracting officer and program office during contract performance. The lack of formal process is sometimes advantageous during negotiations.
- Ability to Recover Fees: Professional service costs such as legal fees, consultant fees, and other costs to materially further the negotiation process are allowable and recoverable under an REA. FAR 31.205-33. Moreover, a thorough and professionally prepared REA increases the chance of convincing the contracting officer and program office of the merits of the REA, which also reduces the likelihood of a formal dispute.
- Maintains Options: An REA can be converted into a claim or withdrawn.
- Certifications Above Thresholds: An REA to a civilian agency does not require a certification; an REA to the Department of Defense (“DOD”) only requires a certification if over $250,000.
Why Might a Claim Be Advantageous?
A claim may be advantageous for several reasons:
- Expedite the Process: Submitting a claim instead of an REA could expedite the process in circumstances where a negotiated resolution is unlikely.
- Begin Accruing Interest: Interest begins to accrue upon submission of a claim.
- Statute of Limitations Considerations: Submission of an REA does not toll the statute of limitations. Thus, contractors who are running short on time may wish to proceed directly to filing a claim in order to ensure they meet the statute of limitations.
How Can I Determine Whether My Submission Will Be Treated as an REA or a Claim?
It is of critical importance to understand how your submission will be treated both for statute of limitations purposes and because a COFD on a claim starts the clock for the contractor’s appeal to either the Boards of Contract Appeal or the Court of Federal Claims.
A recent Federal Circuit case addresses the tension between whether a submission is an REA or a claim, finding that the appellant’s submission, which was styled as an REA, was in fact a claim because it met the requirements of a “claim” under the Disputes clause at FAR 52.233-1(c), used the claim certification, and implicitly requested a final decision. Zafer Constr. Co. v. United States, 40 F.4th 1365 (Fed. Cir. 2022). This is consistent with the Federal Circuit’s 2019 ruling in Hejran Hejrat Co. Ltd. v. United States Army Corps of Engineers, 930 F.3d 1354 (Fed. Cir. 2019), in which the Federal Circuit found that a submission may be treated as a claim where it impliedly requests a COFD, even if it is styled as an REA.
A few key aspects of the Zafer Court’s analysis are as follows (all internal citations and quotations omitted):
- “[A] request for equitable adjustment can constitute a claim.”
- “Magic words are not required” in order to submit a valid claim.
- The determination of whether a submission is a claim or an REA “focuses on whether, objectively, the document’s content and the context surrounding the document’s submission put the contracting officer on notice that the document is a claim requesting a final decision.”
- “There is no necessary inconsistency between the existence of a valid CDA claim and an expressed desire to continue to mutually work toward a claim’s resolution.”
So what can a contractor do if it wishes to avoid having its REA treated as a claim, in light of the fact that even an implied request for a COFD may result in the submission being treated as a claim?
- According to the ASBCA, where the contractor “scrupulously” avoids requesting a COFD, this weighs in favor of treating the submission as an REA. BAE Sys. Ordnance Sys., Inc., ASBCA No. 62416, 21-1 BCA ¶ 37800 (Feb. 10, 2021). However, after Zafer, this alone may not be enough. Additionally, “[t]he contractor’s decision to use a non-claim certification could prove to be helpful, though not necessarily dispositive, data point.” BAE Sys. Ordnance Sys., Inc., ASBCA No. 62416, 21-1 BCA ¶ 37800 (Feb. 10, 2021).
- In another case, the Civilian Board of Contract Appeals (“CBCA”) found that a contractor’s inclusion of several qualifiers about the amount at issue weighed in favor of treating the submission as an REA because there was no “sum certain.” Sage Acquisitions, LLC v. Dep’t of Hous. & Urban Dev., CBCA No. 6631, 22-1 ¶ 38031 (Apr. 5, 2021). The Zafer decision reaffirms the need for a claim to request a sum certain, and thus, is not inconsistent with this decision.
Ultimately, the contractor must “scrupulously” avoid expressly or implicitly requesting a COFD in an REA, pay very close attention to how the contracting officer’s response to its submission is styled, be prepared to appeal any response that may be construed as a COFD, and consult counsel whenever there is uncertainty.
Tips for REA Negotiations
- Include a detailed description of what the government did or did not do that establishes the contractor is entitled to relief under the relevant contract clause. Make the description easy for the Government to understand the contractor’s negotiation position.
- Include a legal explanation linking the facts to the appropriate law demonstrating why the government should pay the increased costs or adjust the schedule or other relevant terms.
- Include key documents to support the REA such as contractual documents, correspondence, expert opinions, and any other documents that help explain the analysis.
- Express a willingness to exchange information and continue negotiations. Promptly respond to any Government responses.
- Maintain the same posture during negotiations to avoid unintentionally converting an REA to a claim (e.g., going from letters without a certification to a letter with a certification or requesting a final decision).
- In light of the Zafer Court’s discussion of how contracting officers may be able to issue a COFD when doubt exists as to whether a submission is an REA or a claim, contractors submitting REAs should be mindful of this possibility and the jurisdictional timelines that attach to a COFD.