Lifecycle of a Claim, Part III: Submitting a Claim

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Stephanie M. Harden and David L. Bodner ●

Stephanie Harden's Headshot Photo

Welcome back to our “Lifecycle of a Claim” series. This series explores the Contract Disputes Act (“CDA”) claims process, with practical guidance stemming from recent case law every step of the way. Click the subscribe button on the right to get timely updates right in your inbox!

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 and here to read our second post. This post focuses on Step 5 of this process: submitting a claim.

Seven Elements for Submitting a Claim

Once a contractor has made the decision to pursue a CDA claim, the contractor must ensure that it follows the Contract Disputes Act or risk jeopardizing its ability to obtain meaningful judicial review. While the Federal Circuit has made clear that a claim need not take “any particular form or use any particular wording,” below are seven fundamental elements that should be included:

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Lifecycle of a Claim, Part II: Submitting a Request for Equitable Adjustment and Negotiation

Stay up to date by subscribing to our blog. Add your e-mail address to the Subscribe box on the right to get our timely posts delivered directly to your inbox.

Stephanie M. Harden and David L. Bodner ●

Stephanie Harden's Headshot Photo

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. Click the subscribe button on the right to get timely updates right in your inbox!

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).
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Lifecycle of a Claim, Part I: Identifying the Change and Providing Notice

Stay up to date by subscribing to our blog. Add your e-mail address to the Subscribe box on the right to get our timely posts delivered directly to your inbox.

Stephanie M. Harden and David L. Bodner ●

Stephanie Harden's Headshot Photo

Welcome to our new “Lifecycle of a Claim” series. This series will explore the Contract Disputes Act claims process, with practical guidance stemming from recent case law every step of the way. Click the subscribe button on the right to get timely updates right in your inbox!

The claims landscape for government contractors can be a minefield of both procedural and substantive issues. Through this series, we are providing a guide to one common type of claim: those arising out of a “change” to the contract.

We are pleased to introduce this infographic (click here or the image below to expand), which illustrates the lifecycle of a typical claim:

This post focuses on Steps 1 and 2 of this process: identifying when a change has occurred and providing timely notice to the Contracting Officer. We begin with a few foundational questions:

What is a change?

There are two primary types of changes:

      • Actual Changes: According to the Federal Acquisition Regulation (“FAR”), a change occurs when the Contracting Officer issues a written order to make changes within the general scope of the contract to matters such as drawings, designs, or specifications; the method of shipment or packing; or the place of delivery. See, e.g., FAR 52.243-1.
      • Constructive Changes: A constructive change arises when the contractor is required to perform work beyond the contract requirements, but the Government does not issue a formal change order. Constructive changes can arise from informal orders, defective specifications or other misrepresentations, interference from the Government, or constructive accelerations of performance.
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Cost Realism: Frequently Asked Questions

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David L. Bodner ●

Understanding the basics of cost realism can help offerors submit more competitive proposals and withstand cost realism challenges to award. The Government Accountability Office (“GAO”) cites cost realism as one of its “most prevalent reasons for sustaining protests” in its Fiscal Year 2021 Bid Protest Report.

What is a cost realism analysis?

A cost realism analysis is a FAR 15.404-1(d)(1)-prescribed proposal analysis technique where the agency determines if the proposed costs are realistic for the work to be performed. In a cost reimbursement contract, an offeror’s proposed costs are not controlling because agencies are responsible for all actual and allowable costs. A cost realism analysis determines if an offeror is proposing unrealistically low costs to secure award. An agency cost realism analysis evaluates each offeror’s proposed cost elements (e.g., direct costs, overhead, G&A, material and subcontracting, etc.) for the unique technical approach proposed to determine the expected cost of performance. If the agency determines a proposed cost element is unrealistic, the agency can adjust the offeror’s evaluated cost, typically upward. The agency uses each offeror’s evaluated cost to select the best value awardee. However, the contract award reflects the awardee’s proposed total cost.

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New Federal Circuit Guidance Regarding Patent and Latent Ambiguities

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Stephanie M. Harden, Patrick F. Collins, and Ustina M. Ibrahim*

Stephanie Harden's Headshot Photo

Ambiguities in a solicitation or contract have long been one of the greatest traps for unwary contractors. At the solicitation phase, a failure to identify a “patent” (i.e., obvious) ambiguity often results in the contractor losing the competition with no viable bid protest challenge. This is because such ambiguities are construed in the agency’s favor. A contractor seeking to recover added costs based upon an ambiguous contract term will be unable to recover such costs if the ambiguity is “patent” and the Government disagrees with the contractor’s interpretation.

Traditional Test for Patent vs. Latent Ambiguities

So how does one distinguish between “patent” and “latent” ambiguities? Numerous Federal Circuit authorities tell us that a patent ambiguity arises where there is “an obvious omission, inconsistency or discrepancy of significance” that “could have been discovered by reasonable and customary care.” E.g., Per Aarsleff A/S v. United States, 829 F.3d 1303, 1312-13 (Fed. Cir. 2016) (internal quotations omitted). By contrast, a latent ambiguity is a “hidden or concealed defect which is not apparent on the face of the document, could not be discovered by reasonable and customary care, and is not so patent and glaring as to impose an affirmative duty on plaintiff to seek clarification.” Id. (internal quotations omitted).

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Government Contractor Best Practices in Light of Afghanistan Withdrawal (Part 2)

Merle M. DeLancey Jr. and Craig Stetson*

Our Part 1 post addressed contract administration related to changes to or a termination of a contract arising from the government’s withdrawal from Afghanistan. This post focuses on the cost management, documentation, and government audit aspects that contractors should be focused on to prepare for and mitigate downstream and currently unknown risks.

Requesting Payment/Compensation

Responding to a change or termination will likely involve submitting a request for payment or compensation. The label placed on a contractor’s request for payment depends on whether its contract has been terminated or has experienced a “change.” The type of request for payment also can vary depending on the type of contract involved (i.e., cost reimbursement, fixed price, or labor hour).

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Government Contractor Best Practices in Light of Afghanistan Withdrawal (Part 1)

Merle M. DeLancey Jr. and Craig Stetson*

It is hard to describe the manner in which the United States is withdrawing from Afghanistan. At this point, the safety and security of Americans and those who provided critical assistance to U.S. operations in Afghanistan are at the forefront of everyone’s thoughts. However, contractors in Afghanistan must confront the repercussions of shutting down operations in Afghanistan or dealing with significant changes in contract performance requirements. Translated—this means ensuring fair compensation for terminated or changed contracts.

This blog post focuses on the contract administration aspects that contractors should be thinking of now to prepare for and mitigate downstream and currently unknown risks. Below is a list of issues for contractors supporting operations in Afghanistan to consider.

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Tips to Maximize Contractor Recoveries for Public Health-Related Claims: Lessons from Pernix Serka and the Ebola Crisis

Justin A. Chiarodo and Stephanie M. Harden

Stephanie Harden's Headshot Photo

Does the mere existence of a deadly epidemic entitle a contractor to monetary relief when it experiences cost increases stemming from that epidemic? Not without Government direction, ruled the Federal Circuit in affirming a decision of the Civilian Board of Contract Appeals (“CBCA”) in Pernix Serka JV.

The facts of Pernix Serka are striking: a contractor repeatedly requests guidance for dealing with a major health crisis, the Government refuses to provide guidance, and the contractor is unable to recoup the additional costs it incurs in order to proceed with performance because the Government provided no guidance.

This timely ruling sheds light on strategies contractors should consider for recouping costs stemming from the COVID-19 pandemic. We provide a roadmap below for navigating these issues in light of Pernix Serka JV.

The 2014 Ebola Crisis

Pernix Serka was in the midst of performing a contract in Sierra Leone when a deadly Ebola outbreak struck the country in 2014. Pernix Serka diligently sought guidance from the Contracting Officer on its State Department (“DOS”) contract, but the Government refused to weigh in on whether it should temporarily shut down its work on the contract. Ultimately, Pernix Serka decided to temporarily withdraw its personnel, which the Government then characterized as Pernix Serka’s “unilateral” decision. When Pernix Serka sought advice on whether and when to resume work, the Government went so far as to say that “DOS will not provide any instructions or directions” regarding whether and when to return to the work site. The contractor ultimately decided to resume performance, but incurred additional costs when it decided to contract for medical facilities and services on the project site.

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Executive Order Increases the Minimum Wage for Federal Contractors—What Is the Impact?

Scott Arnold

Legal developments aimed at government contractors do not always make headline news in mainstream media, but last week’s Executive Order on Increasing the Minimum Wage for Federal Contractors, April 27, 2021 (“Executive Order”), did get widespread attention, perhaps because it is viewed by some in political circles as the next best thing for an administration that sees substantial congressional hurdles for more broadly applicable minimum wage increase legislation. So you have probably heard about about the Executive Order, but how will it impact government contractors?

What does the Executive Order do?

The Executive Order will increase the hourly minimum wage for workers working on or in connection with federal government contracts to $15.00, effective January 30, 2022. This will be a substantial increase from the current minimum wage of $10.95 applicable to most federal contracts pursuant Executive Order 13658. (EO 13658 originally set a federal contractor minimum wage of $10.10, effective January 1, 2015, when it was issued by President Obama in early 2014. That minimum wage has since increased annually.)

How will the increase be implemented?

The Secretary of Labor is to issue implementing regulations by November 24, 2021, and the Federal Acquisition Regulatory Council is to amend the FAR to provide the new minimum wage provisions in federal procurement solicitations, contracts, and contract-like instruments within 60 days after issuance of the Labor Department’s implementing regulations.

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Paycheck Protection Program Audits Are Upon Us—Borrowers Prepare!

Merle M. DeLancey Jr., Craig Stetson*, and Jennifer A. Short

In our last post on this topic, we touched on how the acceptance, use, and forgiveness of Paycheck Protection Program (“PPP”) loans can be viewed in the context of a Defense Contract Audit Agency (“DCAA”) audit. This post focuses on audits and investigations involving PPP loans. Close scrutiny of PPP loans is not a prediction; it is reality. The Small Business Administration (“SBA”) has announced it will audit all PPP loans in excess of two million dollars following a lender’s submission of a borrower’s loan forgiveness application, and it reserves the right to “spot check” any PPP loan of a lesser amount at its discretion. The Department of Justice has already charged multiple individuals with PPP fraud. And this is just the beginning of what many think will be a tidal wave of enforcement activity involving PPP loans.

Overview of the PPP

The PPP is the largest relief measure for small businesses under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The government has made available nearly one trillion dollars in PPP relief funds through four separate funding measures ($349 billion via the CARES Act; $310 billion via the PPP and Health Care Enhancement Act; $284 billion via the Consolidated Appropriations Act of 2021; and $7.25 billion via American Rescue Plan Act of 2021).

The PPP makes available guaranteed SBA loans to small business that meet certain eligibility requirements. In addition, PPP loans can be forgiven fully if used properly to cover specified business expenses such as payroll, rent, utilities, mortgage interest, and other limited uses. As of April 11, 2021, the SBA had approved more than 9.5 million loans totaling more than $755 billion using more than 5,400 lenders.

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