Vern,

You are right, of course. I seem to have been guilty of speed reading or very bad grammar or wishful thinking or something.

Let’s allow that you are correct in stating, “I say that a contractor can write a letter asking for money, cite the Changes clause as the basis for entitlement, demand a contract modification, never mention the Disputes clause, and, if the amount requested is below $100,000, never use the word "claim," and still have submitted a "claim" as defined in FAR 33.201. I say that the interest clock will start to run the moment that the contracting officer gets that letter.“

The contractor’s written request may be worded ambiguously (intentionally or unintentionally) with the result that the Contracting Officer doesn’t know whether he/she has a claim “under the Disputes Act” or not, and doesn’t know whether the clock is ticking or not.

FAR 33.206 Initiation of a claim. “The contracting officer shall document the contract file with evidence of the date of receipt of any submission from the contractor deemed to be a claim by the contracting officer.”

It appears to me that the contracting officer is going to have to “deem” on some basis.

Since Reflectone the contracting officer can’t ask whether there is a pre-existing dispute. However, the contracting officer might want to know whether the contractor expects a final decision. If the contractor explicitly asks for a final decision, there shouldn’t be a question. If the request is merely implied, the contracting officer should be able to ask for a clarification.

Perhaps something like the following--

“It isn’t entirely clear from your letter whether you are requesting a contracting officer’s final decision. To assure that there will be no question regarding the allowability of costs related to this request you are requested to indicate in writing whether or not you expect a final decision in accordance with the “Disputes” clause.”

“In accordance with FAR 31.205-47, costs incurred in the prosecution of claims or appeals against the Federal Government are not allowable. This includes ‘administrative and clerical expenses; the costs of legal services, whether performed by in-house or private counsel; the costs of the services of accountants, consultants, or others retained by the contractor to assist it; costs of employees, officers, and directors; and any similar costs.’”

If the contractor doesn’t intend to start the clock, the contracting officer shouldn’t have any difficulty getting a response.

If the contractor requests a final decision, there is clearly a claim under the Disputes Act.

If the contractor waffles or chooses not to respond, the contracting officer can assume that the contractor intends a claim under the Disputes Act but wants to keep both options open.

Question: If the contractor is cooperative and we reach agreement, I would probably not wish to penalize the contractor by disallowing the costs related to the request. Could I allow the contractor to withdraw a claim and thus retroactively make the costs allowable? This might make it a lot easier to reach agreement.

Eric

By Vern Edwards on Tuesday, October 24, 2000 - 06:23 pm:

John:

The Disputes clause describes a detailed procedure for the submission of claims; the Changes clause does not prescribe a detailed procedure for the submission of REAs. Indeed, the Changes clause does not even mention REAs. Thus, the procedural requirements of the two clauses are different. But that difference has no bearing on our disagreement.

Our disagreement is about your assertion that REA and claim are "separate concepts." I say that some REAs are claims and some are not, and that the difference depends entirely on their content.

An REA is a request for an equitable amount of more money or more time. The Changes clause does not specify any format or content for REAs. REAs come in many forms. Some of them are in writing, and ask an equitable adjustment as a matter of right, and request that the CO mod the contract. Some that are in excess of $100,000 include the requisite claims certification. Thus, some requests for an equitable amount of more money or more time include all of the elements of a claim. We have the Federal Circuit saying that an "REA" was a "claim."

Since an REA can come in the form of a claim, it follows that REAs and claims are not necessarily mutually exclusive. Since REAs and claims are not necessarily mutually exclusive, it follows that they cannot be separate concepts.

You are right that there is no requirement for a contractor to cite any relief granting clause in a claim. However, if a contractor chooses to cite a relief granting clause, such as the Changes clause, it does not follow that its REA is not a claim for that reason. In any event, a contractor must seek a claim as a "matter of right," and that right must rest on a relief granting clause or a breach of contract.

It is not true that a contractor must invoke the Disputes clause in a claim. Neither FAR Subpart 33.2 nor the Disputes clause impose any such requirement. Not even the claims certification mentions the Disputes clause. Can you cite a single court decision holding that a claim must invoke the Disputes clause? I have already shown that the Federal Circuit has held that a claim need not even include an explicit request for a CO decision.

John, you and Joel are two guys whom I hold in high regard based on your submissions to this forum. When I find myself disagreeing with either of you I automatically question the rightness of my own position. In this case, you have not proven your assertion that REA and claim are separate concepts, although it is clear that you believe that they are. In order to prove the validity of your assertion you would have to show me that REA and claim are so defined as to make them mutually exclusive. Since claim is authoritatively defined, you must find an authoritative definition of REA that excludes all elements of a claim. I do not think that you can do that, but I am open to new facts.

I have no desire to argue this to the point where it is no longer informative or interesting either to us or to others. I am open to accepting your ideas in this regard if you can demonstrate their validity. Otherwise, I am going to continue to believe, as does the Federal Circuit, that a while an REA and a claim are not necessarily the same thing, neither are they necessarily different things.

With respect and admiration, your colleague,

Vern

By Vern Edwards on Tuesday, October 24, 2000 - 06:33 pm:

Eric:

Good points. I think that the procedure that you have proposed makes sense. I would add one thing to the letter--I would ask if the contractor is submitting a claim and asking for a final decision. If the contractor is unsophisticated, as many are, it may not understand the relationship between claim and final decision.

I also think that your idea about allowing the contractor to withdraw the claim makes sense. I think that's a CO option, although some may disagree. I would explain to the contractor that if it wants to withdraw its claim and its entitlement to interest, then I would consider its claims preparation costs to be allowable, otherwise I would not.

One caveat about that, however. Claims prep costs may be included in an overhead account, in which case allowability may be a matter for DCAA and an ACO, rather than a PCO.

Vern

By joel hoffman on Tuesday, October 24, 2000 - 11:05 pm:

Vern, I agree it is not productive to debate this issue with you. My primary point is that the FAR definition of a claim and the Disputes Clause both require a matter to be submitted to the KO (PCO or TCO, depending upon the circumstances - perhaps an ACO with authority to deny claims or issue CODs?) for a written decision (I agree there are exceptions, on a case by case basis).

In order for the KO to know it must decide a matter, our contractors must (usually)imply or directly request that the PCO become involved, because our ACO's not the PCO's, are the authorities contractors deal with on contract administration matters.

Obviously, in some other organizations, the contractor is dealing directly with the KO, without an intermediary. Happy Sails! Joel

By joel hoffman on Wednesday, October 25, 2000 - 08:09 am:

I am curious as to the origin and background of the requirement for certifications of requests for equitable adjustments, separate from that for a claim under the Contract Disputes Act. The requirement has been around for years but was apparently moved from DFARS 233 to DFARS 243. As you can see, this 1998 requirement is post "Reflectone" (Jul 95). Apparently the DOD feels that there is a distinction between "REA's" and "claims".

From DAC 91-13 ([Federal Register: March 9, 1998 (Volume 63, Number 45)]) Item XXVIII-Certification of Requests for Equitable Adjustment (DFARS Case 97-D302):

" The interim rule issued by Departmental Letter 97-014 on July 11, 1997, is revised and finalized. The rule implements 10 U.S.C. 2410(a), as amended by Section 2301 of the Federal Acquisition Streamlining Act of 1994 (Public Law 103-355). 10 U.S.C. 2410(a) requires contractors to certify that requests for equitable adjustment that exceed the simplified acquisition threshold are made in good faith and that the supporting data are accurate and complete. The final rule differs from the interim rule in that it amends DFARS 243.204-70 to clarify that the certification required by 10 U.S.C. 2410(a) is different from the certification of a claim under the Contract Disputes Act; and amends 252.243-7002 to clarify requirements for contractor disclosure of facts to support a certification of a request for equitable adjustment."

Can anyone help? Thanks. Happy Sails! Joel

By John Ford on Wednesday, October 25, 2000 - 10:44 am:

Joel, as the quoted language indicates, the requirement for certification of REAs (and other requests for contract adjustments other than claims under the CDA) comes from Congress. This is part of the antifraud measures Congress believes is necessary to deter defense procurement fraud. It is a follow-on to the requirment for contractors to certify their indirect cost submissions. DoJ also like the idea of a certification as it gives them a real live body to go after for false claims.

By Vern Edwards on Wednesday, October 25, 2000 - 12:03 pm:

Joel and John:

Allow me to say that I think that best practice for contractors is to make it clear when they are submitting a claim. They should call it a claim, cite the Disputes clause, and conform to the requirements of the clause.

But as a practical matter, many contractors are not intimately familiar with the Dispute rules. A CO should not assume that a request is not a claim because it is labeled "request for equitable adjustment," because it does not cite the Disputes clause, or because it does not explicitly request a CO decision. That could be a mistake, as we know from the case law.

Thanks for an interesting discussion.

Vern

By Fred Weatherill on Wednesday, October 25, 2000 - 12:39 pm:

Vern,

Since my 10-20 posting, I have followed the discssion with great interest. In the responses I see reminders of the training that I have received over the years about claims. For lack of any better name, I will call it the gestation theory of claims. It is the idea that a claim is what you have after you go through a series of prescribed stages. The stages include (others may have more or less) 1. some kind of contract action by the government, 2. selection of an adjustment clause, 3. negotiations with the contractor about time and or money, 4. failure to agree, 5. dispute, 6. claim (request, sum, certification, etc). In reality this was not a straight line. Thus, all the twists and turns about adjustment, dispute, and claim. The benefit of Reflectone is that it does away with the gestation theory. Now, an REA meets the definition of a claim under the CDA.

Once we accept the new reality, the question then becomes "What is the practical effect of Reflectone at the project site?" My experience tells me that on most projects the government will continue to make changes, the contractor will continue to propose its adjustments, a change will be made, and the work will continue. Neither the word nor the idea of "claim" will occur to either party. Will the opposite happen, yes.

The difference is not the legal doctrine of claims, but the nature of the relationship of the parties, and the context of the events. The Court says that, "Refleltone's REA is a claim as defined in the FAR". It does not say that the parties have to behave like every REA is a "claim".

By Eric Ottinger on Wednesday, October 25, 2000 - 01:21 pm:

Vern,

1. I think we are agreed that there is no requirement for a final decision if the final decision in never explicit or at least clearly implied (i.e. the certification for a claim is submitted.)

2. If there is nothing in the submission to distinguish the “claim” from an REA, why should the Government pay interest?

What is the worst that could happen to this CO who assumes that a request is not a claim?

If the request is over the threshold, the wording of the certification should answer the question immediately (or the CO should request that the defective certification be corrected immediately).

If the request is under the threshold, it would be a very stupid businessman who would choose to recover the interest, given a choice between a couple of months of interest on a sum less than $100,000 and the administrative cost to prepare the request.

Unless I am missing something, this seems to be a very hypothetical issue.

Quoting the CON 210 course in the Deskbook—

“Submissions that are considered or identified as REAs may later ripen into a CDA claim when negotiations reach an impasse or when the contractor specifically or impliedly requests a final decision.”

There you have it. A claim is an overripe REA.

Eric

By John Ford on Wednesday, October 25, 2000 - 01:58 pm:

Eric, I am going to have to disagree with your last assertion. A claim is not an overripe REA. Claims can come from events that do not give rise to an equitable adjustment, such as pure delay. However, I do agree that an REA may ripen into a claim if it is disputed, is not acted on in a reasonable amount of time, or if for any other reason the contractor decides its time to change directions from an REA to a CDA claim. Also, for adjustments under the Changes clauses and other non routine requests for payment, the contractor can go the claims route under the Disputes clause immediately without using the Changes clause.

By Vern Edwards on Wednesday, October 25, 2000 - 02:12 pm:

Eric:

You are right that the issue is somewhat hypothetical. Remember that I was taking issue with John's assertion that an REA and a claim are "separate concepts."

I have not said that there is no difference between an REA and a claim. What I have said is that some REAs are claims and some are not, depending on their content.

REA is not a clearly defined concept. FAR does not define that term. I don't know of any court decision that makes a clear distinction between REAs and claims. It is clear from the court decisions that some REAs are claims and some are not, depending on how they are worded.

The words REA and claim mean different things to different people. Look up "claim" in a law dictionary. It often means nothing more than a demand for money. I know contractors who say that they submitted a claim whenever they asked for more money or time, but don't mean a claim as that term is used in the Disputes clause.

However, common usage does not necessarily make the law. When the Federal Circuit said, in Reflectone, "[W]e hold that Reflectone's REA was a CDA 'claim'," that does not come across as endorsing the notion that REA and claim are separate concepts.

If the readers of this forum understand that a claim need not label itself as such, make an explicit request for a CO decision, or cite the Disputes clause, then I have made my point.

What's the worst that could happen if a CO does not recognize that something labeled "REA" is a claim? Well, if a CO takes too long to negotiate a setlement he may get an unwanted notice that the contractor has appealed to a board or court saying that the contracting officer's failure to resolve the issue in a timely matter amounted to a final decision to deny the claim. This has happened. In some of these cases the government has argued that the board or court had no jurisdiction because the REA was not a claim. If the board or court decides that the REA was, in fact, a claim, then the Government may be facing a trial and the payment of interest if the contractor wins. (However, they can still try to settle.)

How often has this happened? I don't know. Probably not very often. But no CO should be ignorant of his or her contractual obligation under the Disputes clause to render a timely decision or of the government's prospective liability for interest. That's why I took issue with John's assertion. I worry that it could mislead some COs.

COs must know that a letter labeled "Request for Equitable Adjustment" may, in fact, meet all of the criteria for a claim, even though it does not include the word claim, make an explicit request for a final decision, or cite the Disputes clause. The legal record shows that the point is not entirely academic.

I feel that COs, as professionals, should understand that different people may use the terms REA and claim in different ways, intending them to refer to different things, but that an REA may, in fact, be a claim, depending on its content.

That's all I've been trying to say. At this point, I haven't got anything else to say about the issue. Everyone reading this can consider what John has said and what I have said and make up their own minds about how to use our ideas, if at all.

By Eric Ottinger on Wednesday, October 25, 2000 - 02:26 pm:

John,

Not that I want to suggest that this forum is humor-impaired-- But why is it that when I make a clearly facetious comment, there is usually somebody who insists on taking exception.

Clearly the CON 210 authors see the process as relatively seamless. The banana has turned an ugly color but it is still the same banana.

John, if I said that a claim is something that starts to smell when it has been sitting around too long, would that make you happy?

Pending further clarification, I think the practical significance of this argument for practical 1102’s is very small.

The interesting question is whether the parties can reverse this ripening process by mutual agreement. If the supplemental agreement looks like an equitable adjustment, what happens to the claim. My guess is that it becomes a nullity. The contractor shouldn’t get interest and the contractor’s administrative costs should be recoverable.

Pending further clarification—

Regards,

Eric

By joel hoffman on Wednesday, October 25, 2000 - 09:24 pm:

Eric, I disagree. Once the Contractor submits a claim, it can't unilaterally "reverse it", calling it an "REA" upon successful settlement negotiations, in an attempt to trade Contract Disputes Act interest for claims preparation costs, otherwise unallowable in connection with prosecuting a claim.

The KO can and does often respond to the claim with other than a KO "decision". If, upon review of the claim, the KO responds to the Contractor's claim with a partial or full merit determination, I believe that it is too late to "withdraw" the claim and "substitute it" with an REA, unless the KO determines that it is in the Government's best interest (pardon the pun).(-: Happy Sails! Joel

By Eric Ottinger on Thursday, October 26, 2000 - 09:05 am:

Joel,

I don’t think we disagree on anything. I wouldn’t suggest this course of action unless it was in the best interest of both parties.

However, I am unsure regarding the legalities. Would it be sufficient just to draft the modification without any mention of the claim and without the interest (and document the file, etc.) or would something more be required?

Eric

By John Ford on Thursday, October 26, 2000 - 09:32 am:

Eric, you may have an audit problem with this approach. Claim and REA prep costs are usually accounted for by contractors as indirect costs. If you do not address the allowability of prep costs or the nature of the contractor's submission, the auditor reviewing the contractor's (certified upon pain of perjury and potential false claims act liabilities) indirect cost proposal may question the cost as expresly unallowable under FAR 31.205-47. The KO may then have to explain why (s)he allowed an expressly unallowable cost and what authority existed for such action. In this regard, see FAR 31.109.

By Eric Ottinger on Thursday, October 26, 2000 - 09:42 am:

Joel,

I don’t think we disagree on anything. I wouldn’t suggest this course of action unless it was in the best interest of both parties.

However, I am unsure regarding the legalities. Would it be sufficient just to draft the modification without any mention of the claim and without the interest (and document the file, etc.) or would something more be required?

Eric

By Vern Edwards on Thursday, October 26, 2000 - 10:08 am:

Fred:

I apologize for not responding to your 10/25 post sooner. Somehow I missed it.

I like your "gestation theory" analysis. I think that's right--many people think that all claims began as something else, e.g., an REA, and became claims in the course of time when the parties could not reach an agreement. That is often true, maybe even usually true, but it is not always true.

I also agree with you that the reality probably is that in most cases during performance the parties do not think very clearly about whether a request is a claim or not, at least not until they get to the point where they can't agree and start thinking about final decisions and appeals.

Finally, I agree that the parties do not have to treat every REA as a claim. But I hope that every CO understands that a request may meet all of the tests of a claim even though it is labeled REA.

By Eric Ottinger on Thursday, October 26, 2000 - 10:18 am:

John,

For the benefit of those who may find this dialogue confusing-- DCAA auditors do not have contracting officer warrants and ACOs (who are contracting officers not accountants) normally negotiate final indirect rates. However, there are occasions when the final indirect rates are “audit determined.”

There are two questions. First, what do we need to do to make this legal so that it will stand up in court.

Second, what do we need to do to document this so that other participants like the auditor and ACO don’t become confused or cause problems.

If it is legal and the PCO has the authority (not acting contrary to statute or regulation), the ACO and the auditor will defer to the PCO (assuming that the documentation is adequate so that they don’t become confused.)

Presumably the answer is to clearly indicate what the parties intend in the Supplemental Agreement.

Pending better advice-- The ACO determines whether the indirect cost is allowable by asking whether the cost should be categories as cost related to the claim. The PCO normally determines whether a claim exists.

I am speculating that the parties (the PCO and the contractor) can by mutual agreement allow the contractor to withdraw the claim (giving up the interest) and, at the same time, legitimize the costs, even if the costs were segregated and treated as claim related costs up to that point.

Eric

By Eric Ottinger on Thursday, October 26, 2000 - 05:16 pm:

All,

I found this while I was researching another issue. It should keep John and Vern entertained for awhile.

Cubic Corporation v. The United States, (June 06, 1990) United States Claims Court, No. 604-88C, June 6, 1990 20 ClCt 610, as corrected June 12, 1990.

Contract Disputes, Interest--Claim--Request v. Claim.
“Despite government allegations that there was no dispute at the time the contractor filed a request for equitable adjustment, a contractor’s claim for interest was not dismissed, because the government did not treat the request as a routine request for payment. Under a contract to furnish a training device developed from government-furnished lesson plans, the contractor, alleging that the lesson plans were defective, submitted a document entitled “Certified Request for Equitable Adjustment” to the contracting officer, accompanied by a letter asserting a claim under the Changes clause and attachments that contained details of the claim. Subsequent to receiving a settlement on this claim, the contractor filed a claim for interest. The government contended that the request for an equitable adjustment was a routine request for payment that was in pre-dispute negotiation when it settled. However, the correspondence showed that the government did not retreat from its denial that there were defects in government-furnished property. Moreover, in calling the claim “a request for equitable adjustment,” the contractor used the same terms that appear in the definition of a claim.”

“Despite the government’s allegation that a certification was made only to comply with requirements of the Appropriation Authorization Act and not the Contract Disputes Act, a claim was properly certified for purposes of the Contract Disputes Act because the contract contained a provision that certification for one Act would be deemed to comply with both statutes.”

“Plaintiff’s REA was based upon its claim that the price adjustment was due to the deleterious impact of defective Government-furnished property (GFP) and Government-imposed changes. The REA cited the Changes, Government Property, and Government Delay of Work clauses of the contract. The claim letter was accompanied by a CDA certification, a standard from (SF) 1411 “contract pricing proposal cover sheet” and a large volume which discussed the claim in detail. …”

“The parties continued to negotiate and by August 19, 1988 had resolved all issues except plaintiff’s claim for interest on the equitable adjustment claim. The settlement resulted in payment to plaintiff of an additional $7,200,000 ($437,000 in termination expenses and $6,763,000 on the equitable adjustment claim exclusive of interest).”

“It is abundantly clear to the court that plaintiff’s REA was not a voucher, invoice, or other routine request for payment because the premise upon which the REA was based was clearly in dispute when the REA was submitted. Although plaintiff had made routine requests for payment prior to March 28, 1986, its REA was submitted under the changes clause because the contract’s GFP clause required the procedures of that clause to be used as the avenue of administrative relief.”


“’Cubic Corporation certifies that its claim for equitable adjustment, Cubic No. 380-2 dated March 28, 1986, is made in good faith, that the supporting data is accurate and complete to the best of Cubic’s knowledge and belief and the amount requested accurately reflects the contract adjustment for which Cubic Corporation believes the Government is liable.’

Plaintiff’s use of these words of art evinces its intent to file a properly certified claim under the CDA, applicable regulations, and the Disputes Clause of the contract in submitting its request to the CO for an adjustment.”

Eric

By joel hoffman on Thursday, October 26, 2000 - 05:47 pm:

Fellas, I've been working claims for about 17 years but don't know all the answers. I think it would be highly irregular for a KO to allow a claim to be converted to an REA at the settlement stage, in order to allow "preparation costs", which, up to that point were expressly unallowable. The record would show that the matter was a claim, unless somebody buries the file.

There are all sorts of ways to "settle" and write it up. Bottom line can be used, with a good pre-negotiation objective and Government Estimate to cover your offer or settlement. I've seen lump sum with no interest, with interest, whatever.

As to how you can identify proposal prep costs, it isn't that difficult but depends on how the contractor accounts for such costs. Are they directly or indirectly charged? Direct charges for outside help are pretty straightforward.

If included in overhead, the methodology depends on which fiscal year's direct cost base and overhead pools are used to detrmine the applicable overhead rates used. Of primary importance is to identify, segregate and remove all such costs and similar costs in determining the applicable overhead rates being used (if the previous accounting year's cost data re being used to determine OH rates, remove similar costs and you are good to go).

By joel hoffman on Thursday, October 26, 2000 - 06:01 pm:

Eric, the Court Case you cited (Cubic Corporation v. The United States, (June 06, 1990) United States Claims Court, No. 604-88C, June 6, 1990 20 ClCt 610, as corrected June 12, 1990) was decided on the basis that there was clear a dispute between the parties on a non-routine matter. That pretty well sealed it as a claim.

Of course, as of 1995 (Reflectone), even if the matter were not in dispute, it could well be classified as a CDA claim, for other reasons - especially if the "claim" word was mentioned anywhere by the Contractor. It's not clear from your quotes but appears that the term "claim" was used in the correspondence.

Thanks for the input. Happy Sails! Joel

By Vern Edwards on Friday, October 27, 2000 - 09:47 am:

Eric:

Thank for the info.

I did a search this morning on West for "REA /s claim" and found several court and board cases in which the term REA appeared in the same sentence with the word claim. I think that these provide further support for my assertion that REA and claim are not separate concepts. Here are a few examples:

"Thus, an REA provides an example of a written demand for payment as a matter of right which is not 'a routine request for payment' and, therefore, it satisfies the FAR definition of 'claim' whether or not the government's liability for or the amount of the REA was already disputed before submission of the REA to the CO." Reflectone, Inc. v. Dalton, 60 F.3d 1572, July 26, 1995.

"Plaintiff set out its claim in a 107-page Request for Equitable Adjustment ('REA') dated July 31, 1995." Northrup Grumman Corp. v. U.S., 42 Fed.Cl. 1, Sept. 24, 1998.

"On July 18, 1991, ThermoCor submitted a Request for Equitable Adjustment (the 'REA') to the Corps for claims including differing site conditions, delays and disruptions, and variations in estimated quantities." ThermoCor, Inc. v. U.S., 35 Fed.Cl. 480, May 1, 1996.

"For example, Line Item 15 of the REA, referred to as 'REA 15,' was entitled 'Incomplete ECP/ECN Work Scope' and encompassed a claim for "financial harm caused by Class I ECNs being received either late to the schedule cited by the respective ECP or in addition to those contemplated by the ECP." Bath Iron Works Corp. v. U.S., 27 Fed.Cl. 114, Nov. 12, 1992.

"Under the analyses of Cubic Corp. and Dawco, the court concludes that the REA of March 16, 1988, in conjunction with Isles' May 9, 1988 request for a final decision of the contracting officer, constituted a valid claim." Isles Engineering and Const., Inc. v. U.S., 26 Ct.Cl. 240, May 13, 1992.

Similar quotes may be found in board decisions:

"On 24 November 1985, SECO submitted a claim, designated as REA No. 27, in the amount of $8,375." Service Engineering Co., ASBCA No. 42146, 96-2 BCA ¶ 28376, May 28, 1996.

"The part of the Navy's motion which contends the REA claim is not 'the subject of a [final] decision by the Contracting Officer as required by Section 6(a) of the [CDA],' is also based upon a faulty premise." Atlantis Cont. Corp., ASBCA No. 44044, 96-1 BCA ¶ 28045, Nov. 21, 1995.

"On 5 May 1993, GTE submitted its REA as a certified claim with a revised amount ($587,997) for claim preparation costs." GTE Government Systems Corp., ASBCA No. 47646, 96-1 BCA ¶ 28056, Nov. 6, 1995.

I provide these quotes only to show that agencies, contractors, courts, and boards use the terms "REA" and "claim" in ways that are inconsistent with the notion that they are separate concepts.

By Eric Ottinger on Friday, October 27, 2000 - 10:05 am:

Vern,

In Cubic, “REA”, “claim,” and “dispute under the Disputes Act” were all used synonymously. However, Cubic never tipped its hand by using the word “dispute.”

The Court expected the PCO to infer the “dispute” from the circumstances (i.e. the PCO was stonewalling and the certification touched more bases than would be required for a mere REA certification.)

Eric

By Eric Ottinger on Friday, October 27, 2000 - 10:30 am:

Joel,

I am not going to argue with 17 years of experience. I think you are right.

However, just for a little mental exercise, let’s say in alternate universe, Cubic had submitted its REA, the parties had quickly negotiated a supplemental agreement fair to both parties, Cubic had decided that its double purpose certification didn’t really make a claim under the Disputes Act, and Cubic had vouchered for the request preparation costs as the routine allowable cost of contract administration. Would DCAA and the ACO notice? Would the ACO wish to disallow the cost? What would happen in Court?

I have no idea.

I would note that after this Court had dealt with the formalities, it put a lot of emphasis on the behavior of the parties. If both parties had been cooperative and had reached a negotiated settlement without any more than the usual difficulty, I think the Court would have reached a different conclusion regarding the nature of the request.

Eric

By John Ford on Friday, October 27, 2000 - 10:59 am:

As a good portion of the preceding discussion shows, the real question we are talking about here is how to tell whether a contractor's submission is a claim or not. Although we may be able to define the prerequisites for a claim, some contractors file submissions that are so convoluted that it is practically impossible to tell what they are after other than to get paid more money. In many cases, I believe the contractor does not know what it has submitted or could submit and is only interested in getting paid. Therefore, I go back to some advice that Eric gave several posts ago and that is when in doubt as to what the contractor has done, ask. You may not always get a responsive answer, but it cannot do you much harm and may do you a lot of good.

By Vern Edwards on Friday, October 27, 2000 - 11:22 am:

John:

I agree with your last post. I would add this: Many contractors do not understand the Disputes clause, FAR Subpart 33.2, or the case law. They may use the word "claim" in a very general sense, and not in the specific sense in which it is defined in the Disputes clause. Thus, a contractor might answer, "Yes," when asked if it had meant to submit a claim, but intending only that it had meant to ask for money, and not understanding the legal consequences of that answer in the world of government contracts.

So when asking a contractor what it intended, keep in mind that it may not understand the legal consequences of its answer. While it is the contractor's responsibility to know, a good CO will not take advantage of a firm's obvious ignorance.

Also, COs must be conscious of the limits of their own knowledge. COs are obligated to explain the government's interpretation of a contract clause and must be careful not to misinform a contractor. When in doubt about his or her own knowledge of the rules, a wise CO would consult a knowledgeable government contracts attorney before interpreting the Disputes clause for a contractor. Ask the attorney specific questions in writing and ask for his or her answers in writing. (I realize that this might delay the process.) Give your interpretation of the clause to the contractor in writing, after the government attorney has reviewed your letter.

If the matter at hand is potentially serious, it might be wise (and kind) for a CO to suggest that the contractor seek the advice of an attorney who specializes in government contract law. It might make the CO's job a little easier.

By Eric Ottinger on Friday, October 27, 2000 - 11:59 am:

John,

In Cubic, the Court considered REA, claim and claim under the Disputes clause to be equally correct names for the same request.

Vern and John,

If I were Anon, and I received a “claim” out of the blue, I would assume that we are all entitled to the presumption that we are willing to negotiate in good faith until proven otherwise. I would admit that it opens the door to a certain amount of gamesmanship regarding the legal and administrative costs if the contractor submits an REA first, then submits a claim under the Disputes clause subsequently.

However, it defies common sense to say that we should have a dispute when the PCO doesn’t even know that the parties have had an argument.

If the request is unambiguously a claim under the Disputes clause, I would ask the contractor to withdraw it until it was clear that we had actually reached an impasse.

Otherwise, I would ask the contractor to clarify the request and establish that the request is merely an REA and not a claim under the Disputes clause.

I can’t imagine that any contractor with the sense that God gave geese, an offer to negotiate in good faith, and the opportunity to recover several months of legal and administrative costs as allowable costs, would not prefer to hold off for a couple of months before transforming a routine request into an ugly dispute.

Eric

By Vern Edwards on Friday, October 27, 2000 - 01:40 pm:

Eric:

A couple of points:

1. The submission of a claim does not necessarily indicate that the contractor thinks that the parties are in dispute. Remember that the key holding in Reflectone was that a dispute is not a prerequisite to a valid claim, except in the case of routine invoices and vouchers. A contractor may submit an REA in the form of a claim merely in order to set some groundrules for settlement negotiations. A contractor can always waive the decision deadline if it thinks that negotiations are going well.

"Claim" is a hotbutton word to some COs, who react adversely to a "claim" because they think that it represents an adversarial posture on the part of the contractor. But that may not be the case at all.

Remember that the Contract Disputes Act of 1978 was, in part, a Congressional response to industry complaints that COs were dilatory when negotiating settlements. See: Peacock and Ting, Contract Disputes Act Annotated, p. 6-17. By submitting an REA as a claim at the very outset, the contractor sets timelines for settlement. If the claim is for $100,000 or less, the contractor can request a settlement decision within 60 days or can allow the CO to make a decision in a "reasonable time." If the claim is in excess of $100,000, the CO must either issue a decision in 60 days or tell the contractor when he or she will issue a decision.

The existence of a deadline should not preclude good faith negotiations.

2. Do not assume that claims are always costly to prepare. If a contractor is well-organized, well-managed and knowledgeable, it will routinely collect and organize the data necessary to support a claim as part of daily contract administration, before deciding to submit a claim, segregating those costs from the costs of subsequent claim preparation. For such contractors the cost of the preparation of the claim itself may be quite small. Such a contractor may not be giving up much by submitting a claim and losing the allowability of claims prosecution costs.

I don't know why the receipt of a claim should upset a CO. Two months ought to be enough time for any competent CO to settle or deny a claim of $100,000 or less. And if the claim is more than $100,000 and is very complex, a CO can pretty much take as much time as he or she needs. There have been cases in which a board or court has allowed a CO to take more than a year to settle large, complex claims. All a CO has to do when setting the deadline for final decision about a claim in excess of $100,000 is to be reasonable.

By Eric Ottinger on Friday, October 27, 2000 - 02:03 pm:

Vern,

Perhaps,

But it strikes me that the more $ that the contractor drops into the sunk cost unallowable cost pit, the stronger the motivation to go ahead into litigation rather than compromise and settle.

If the Government is stonewalling or dragging its feet, the contractor should put in a claim.

Eric