Subcontractor Certification of Pass-Through Claim — Defective but Correctable

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In June, the Armed Services Board of Contract Appeals (ASBCA) addressed whether it had jurisdiction where a subcontractor pass-through claim was certified under the Contract Disputes Act (CDA) by the subcontractor’s president, not the prime contractor’s representative. In its motion to dismiss, the government argued that under the CDA, only the prime contractor could certify the claim and that the absence of such a certification meant that the ASBCA lacked jurisdiction over the claim.

The prime contractor argued that the subcontractor’s president had authority to bind the prime contractor with respect to the claim based on the parties’ “sponsorship” agreement and the terms and conditions of the subcontract. The ASBCA rejected that argument because under those agreements, the prime contractor “retained sole discretion over submitting [the subcontractor’s] claim and conditioned appeal on protection of [the prime contractor’s] rights or written consent from [the prime contractor].” Notably, the ASBCA allowed that “[i]t is possible that a carefully worded delegation of authority without caveats may work.”

While the ASBCA held that the claim was not properly certified, it did not agree with the government that certification was completely lacking such that it lacked jurisdiction. Rather, the certification was merely a “defective certification,” as defined by FAR 33.201, which meant that it was correctable without depriving the ASBCA of jurisdiction.

Lessons Learned

Under the Contract Disputes Act, the prime contractor must certify a subcontractor pass-through claim for the ASBCA to exercise jurisdiction over the claim. Certification by the subcontractor alone will generally not suffice. Of course, the prime contractor must be careful in certifying subcontractor pass-through claims because under other long-standing precedents, while the prime contractor’s certification does not require the prime contractor to believe that the subcontractor is entitled to recover on the claim, it is necessary that the prime believe that there is “good ground” for the claim.

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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