Requests for Equitable Adjustment Versus Claims: Which Should Contractors Pursue?

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PilieroMazza PLLCGovernment contractors in various industries encounter increased costs and / or delays caused by the government while performing government contracts. For instance, a contractor may have increased costs in performing a contract as a result of compliance with new COVID-19 requirements imposed by the government that were not included in the original contract. Or, a construction contractor may be required by the contracting officer to perform additional work that is outside the scope of the contract. Likewise, a construction contractor could encounter differing site conditions than what appeared in the contract’s specifications, resulting in increased costs and / or delays. In order to receive compensation in terms of additional time to perform the contract, money, or both, a contractor can submit a Request for Equitable Adjustment (REA) or a claim under the Contract Disputes Act (CDA) to the contracting officer. It is not often clear whether it is better to pursue an REA or a claim. Indeed, there are advantages and disadvantages to both. Set forth below are key items to consider when deciding whether to pursue an REA or a claim.

Requests for Equitable Adjustment

Advantages

  1. Informal Process. There is little to no formal process in pursuing an REA. This can be an advantage if the contractor and the federal agency and / or contracting officer are on good terms, and there is a good prospect of receiving compensation in a timely fashion through a negotiation without submission of a formal claim. Moreover, an REA can be submitted at any time during performance and before the contract is closed out. That said, there can be deadlines for submitting an REA contained in the contract. For instance, if the contract contains FAR 52.243-4, Changes, if the contracting officer makes a change order within the general scope of the contract, the contractor must assert its right to an adjustment within 30 days of receipt of the change order.
  2. Recovery of Attorneys’ Fees. Attorneys’ fees incurred in preparing and negotiating an REA are allowable if the REA was not submitted in preparation for filing a claim or initiating an adversarial process.
  3. Flexibility in Challenging Adverse Decisions. If the contracting officer denies an REA, it can always be revised and resubmitted to the contracting officer. This is helpful if the contracting officer is amenable to granting an REA, despite having rejected an initial REA, provided that the contractor submitted additional supporting evidence for the REA beyond what was originally submitted. On the other hand, the contractor can always convert the REA into a CDA claim.

Disadvantages

  1. Delays or Refusal to Issue Decisions on REAs. The flexible process of pursuing an REA has its own set of disadvantages. An agency is not required to respond to an REA within a specified period. Indeed, it may not respond to an REA at all.

CDA Claims

Advantages

  1. Extended Time-Period for Submission. A CDA claim must be filed within six years of when the claim accrued. Thus, in many cases, a contractor has a longer period to submit a claim.
  2. More Certainty on Timing of Final Decision. Under the CDA, for claims in the amount of $100,000 or less, the contracting officer must issue a final decision on the claim within 60 days of receipt of the claim. If, however, the claim is for an amount in excess of $100,000, the contracting officer may issue a final decision on the claim within 60 days of receipt of the claim or provide a firm date within a reasonable time in which he or she will issue a final decision.
  3. Appeals of Adverse Decisions. A contracting officer’s final decision may be appealed to a Board of Contracting Appeals within 90 days or the U.S. Court of Federal Claims within one year.
  4. Recovery of Interest. The contractor may recover interest on a CDA claim commencing on the date that the claim of over $100,000 was submitted to the contracting officer.

Disadvantages

  1. Formal Requirements for a Claim. The contractor’s claim must strictly meet the definition of a claim. It must be in the form of a written demand seeking the payment of money in sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to a contract. It must contain a request for a final decision of the contracting officer and, for claims over $100,000, a certification that
    1. the claim is made in good faith;
    2. the supporting data is accurate and complete to the best of the contractor’s knowledge and belief;
    3. the amount requested accurately reflects the contract adjustment for which the contractor believes the federal government is liable; and
    4. the certifier is authorized to certify the claim on behalf of the contractor.
  1. Lengthy and Time-Consuming Narrative. In preparing a claim, the contractor needs to support the basis for its claims with all factual and legal arguments in support of its claim. This is often a lengthy and time-consuming process, and the contractor may require the assistance of legal counsel to prepare the claim properly.
  2. Legal Costs Not Allowable. Attorneys’ fees incurred in preparing a claim are not allowable.
  3. Adversarial Process. Related to the above, the submission of a claim triggers an adversarial posture between the contractor and the agency. Thus, legal counsel is likely to become more involved as a claim can result in litigation between the contractor and the government. The submission of a claim is more likely to have negative impacts on the relationship between the contractor and the government than the submission of an REA.

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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