Debt Collection Requirements – Government Discretion

Contents of this Section:

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Strategies for resolving government contract claims vary. Chose your way forward carefully.

1. When and How Can the Government Assert Claims Under the Contract Disputes Act?

2. What Causes a Contracting Officer to Resolve Claims and Disputes Without Litigation?

3. Actual Litigation: Using the CDA 60-day Rule for Final Decisions

4. When and How Should Litigation be used to Resolve a Claim?

5. What Are the Best Approaches to Audit, Negotiation, Settlements and Litigation with Regards to Government Claims?

The materials that follow discuss what is still one of the most unclear areas in federal Government contract litigation. What is certain is that if the Government has a claim against a contractor, it must assert that claim in a final decision for it to be effective. The contractor can then choose to appeal the final decision.

When and How Can the Government Assert Claims Under the Contract Disputes Act?

To this day it is unclear exactly when and how the Government must assert its claims against the contractor under the Contract Disputes Act. The Boards and Courts, 25 years after the act was passed, are still grappling with how to resolve such issues. E.g., Comspace, ASBCA No. 51, 780, 01-1 BCA 31,241, and Midwestern Properties, LLC v. United States, GSBCA No. 15, 822, 2002 WL 1813668.

Problem Scenario

Consider the situation in which over the course of contract performance the contracting officer has made payment deductions based upon a number of findings - not final decisions - that contractual services have not been performed correctly.

The contractor has not challenged those deductions for approximately a year. The contracting officer then closes out the contract and another year goes by.

The remaining $100,000 on the contract value is not paid to the contractor and an additional $400,000 in "debt" remains for the alleged incorrectly performed services. The contracting officer turns the $400,000 debt over to a government contract service bureau for collection purposes, and the contractor begins to receive threatening letters.

What should the contractor do? What are the government's obligations under the Contract Disputes Act and Federal Debt Collection procedures? These are not simple questions that have simple answers.

It has been decided that debt collection activities by the federal government are not subject to the CDA appeals process. Thus, the service bureau’s action in seeking to collect the $400,000 from the contractor may not be directly appealed to the ASBCA or the GSBCA.

But, what of the underlying debt for which there has been no final decision? Can the contractor now demand a final decision? There probably should have been a final decision. Yes, it probably can.

We would attack the factual scenario above by demanding a final decision as to the entire $500,000 at issue. To do that a certified claim would have to be submitted and the 60 day clock respected.

The claim could be fairly simple - the contractor now sees that the government disputes that certain services were performed correctly, and the contractor has not been provided with adequate information to determine the bases for the government’s assertions, etc., etc. The amount of money at stake is $500,000. The claim is certified. The document is sent to the contracting officer with a demand for a final decision.

Note that at times, particularly after several years have past, it may be difficult to find out who the contracting officer is. Send the claim and the demand for a final decision in those cases to the original contracting officer. The contractor is in effect making a record - there has been no final decision - he is seeking one. When no response comes in 60 days,  an appeal can be immediately filed.

The contractor can then also apply for a deferral agreement with respect to any collection action under FAR 32.6. Many government trial attorneys will allow the granting of such deferral agreements while litigation is pending at the Board. The FAR procedures do not apply directly in litigation at the Justice Department, although the Justice Department will often listen to such requests.

Now for the more difficult issue -- is there a difference between the $100,000 contract payment that is due and the $400,000 that has been demanded in excess of contract payments. The Government could very well take that position by stating that the $400,000 is a debt that is not subject to CDA procedures. The $100,000 of unpaid contract payments should be CDA covered once the contractor has filed a claim and requested a final decision.

We think the entire $500,000 is covered by the CDA because the amounts in dispute arise from a federal contract, and note that there has been no final decision by the contracting officer asserting the return of those amounts. Thus, the contractor has had to take the matter into his own hands by making a claim for the entire amount. This is not how it is supposed to work procedurally, but often this is what must be done.

What Causes a Contracting Officer to Resolve Claims and Disputes Without Litigation?

Contracting officers are intelligent people. If they see a meritorious claim, they pay it. They may seek to negotiate the claim downward based upon imprecision in the contractor's accounting records, and the lack of proof as to what the claim actually cost the contractor, but once they recognize that the claim has merit it will likely be settled.

Therefore, if knowledgeable individuals in the company believe that a claim is meritorious, the company should present that claim in the most straightforward manner possible. The contracting officer should be contacted and discussions had to be sure there are no miscommunications about the bases for the claim. Once the parties both understand that a meritorious claim has been presented, a settlement should result in due course.

Program Issues

It is not thoughtful to simply consider the merits of a claim without also thinking about what is going on in the particular program at the time.

• Is a program in funding difficulty?

• Is the contractor meeting specifications, but the item failing to satisfy the operational needs for which it was originally bought?

• Is the Government dissatisfied with the contractor's performance - whether they are correct or not?

• Are other systems which interface with the contractor's system performing and progressing correctly, or are there other ancillary difficulties?

All of these are program management issues, of which there are many more that can potentially affect the disposition and the handling of claims in both the contracting officer negotiation stage and later in litigation. You can have the most meritorious claim possible, but if the program is in funding difficulty or performance is not to the Government's expectation, that claim will often not be settled in the ordinary course. It may be settled as part of a convenience or default termination.

Pressing forward blindly with meritorious claims, while not paying attention to other politically related issues, including program issues, is not a thoughtful strategy.  Dealing with program issues must be integrated  into the contractor's overall strategy for the resolution of its claims before and after litigation commences.

For example, could claims be reduced and traded off for a reduction in program work or units to be delivered?

Agency/Congressional Politics

Closely related to some of the foregoing program issues are real internal agency and congressional politics. At its most extreme level a congressman in Florida may have a constituent company that does the same kind of work that you are doing under a current Government contract in Massachusetts. Be on guard for the fact that the Florida congressman may be doing things such as inserting earmarking language in bills that in very real ways reduces your chance of follow-on procurements and the like.

This type of activity is occurring on a daily basis and contractors must be alert to it. Such issues are outside the scope of discussion of this course, but they do exist and can override virtually everything that we are considering here.

Perhaps more commonly, contractors may be producing an item - a radio based upon a certain technology - when agency technical people determine that such technology will not be used in future items, even though it is perfectly satisfactory, given that a new technology is available. You need to adapt your claim preparation and litigation strategy to the fact that you are working on the last procurement of this particular technology unless agency technical people are turned around on this issue. There is generally less interest and attention in solving claims, litigation, and other problems on "dead" programs.

There are professionals who are ethical and excellent in dealing with these types of situations on behalf of a company. They are generally not government contract trial lawyers.

Claim Bases – Basic vs. Complex

As indicated in the opening section, you must make a rational appraisal of whether your claim basis is basic and simple, or more complex. If the claim basis is more complex, a greater amount of activity and work will be required on your part (and accordingly time consumption) to prepare a claim that can be communicated adequately to the other side. Basic claims can be presented in several pages. It is not unusual to see complex claim presentations, typically in which many individual actions created extra work, that include hundreds or even thousands of pages.

The more complex a claim is, the more difficult it often is to settle. The reason is that contractors do not spend enough time, as complexity increases, to educate and present their customer with an understandable basis of why the claim is being pursued, its merits, and supporting accounting information.

Audit Considerations

If the contractor is asking for additional money, and the claim is substantial in size, both the contracting officer, and later the agency’s trial attorneys, will ask for an audit of the claim’s accounting section by DCAA or other agency accounting functions as applicable.

Contractors are notoriously bad in neglecting the audit, and in allowing DCAA or other agency audit functions to produce the audit without being fully aware of the contractor's claim contents, the various supplemental documents that may have been submitted, and without adequate attention to auditors’ questions.

“The more complex a claim is, the more difficult it often is to settle. The reason is that contractors do not spend enough time, as complexity increases, to educate and present their customer with an understandable basis of why the claim is being pursued, its merits, and supporting accounting information.”

The auditors should be engaged. We are aware of one construction dispute that ultimately went to litigation and then settled in which the company president made himself available several hours a day to discuss with the auditors the basis of the contractor's claim - both in the morning when the auditors came in, and each day as an exit basis when the auditors were finishing up. We are convinced that the claim was resolved because the company's president, who was knowledgeable of virtually all the facts relating to the job and the claim, was able to explain to the auditors both factually what took place during the formation of the claim, as well as the way in which costs were incurred and recorded on the contractor's books as a result of claim events.

Do not underestimate the importance of the audit, as well as the importance of having knowledgeable individuals work with the auditors to explain the company's position. Auditors are independent and they will arrive at their own conclusions. They cannot arrive at conclusions in the company's favor unless the company presents all of the information that auditors need to consider. Treating auditors as if they are irrelevant to the claims process or as a negative is foolish.

Audits in Litigation

Indeed, there are times when the company should be aggressive in insisting as part of the claims process or later in litigation that an audit be conducted, and that the audit be conducted under certain terms. See the motion set out below as an example:

BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of ___________

ASBCA No. __________

Under Contract No. ____________

MOTION FOR THE BOARD TO CALL FOR EVIDENCE: DCAA AUDIT AND GROUND RULES THEREFORE

The Appellant hereby moves the Board to give the Government direction to perform the DCAA audit in a fashion that is fair and reasonable, and will find facts for both sides with respect to the dispute that exists between the parties.

Appellant and Government counsel cannot agree as to exactly what DCAA will do in its audit. Given the issues in this case, it is very important that DCAA conduct its audit in a fashion which will produce evidence of use to both sides in this case. That is DCAA's function - certainly in litigation before the Board - to produce balanced accounting information that fairly reflects both parties’ positions so that the Board may make the ultimate decision.

The Government has recently asserted in its answer and final decision that Appellant has no actual costs/expenditures beyond what has already been reimbursed for the periods in which the Government has failed to pay, and for which it seeks a refund. That is incorrect.

Appellant seeks a proper audit to show that if the Government chooses to not pay Appellant's charges as previously agreed to, it owes the same funds or additional funds as ……… for costs actually expended in performing the contract work in question. The audit needs to be conducted in a fashion which will determine whether that is correct or incorrect for both sides. Appellant has prepared an appropriate Order for the Board's signature.

Respectfully submitted,

Attorneys for Appellant

Honesty, Fairness and Transparency by Both Parties are Key to a Good Settlement

It is only when both parties understand each other's positions, and their respective strengths and weaknesses, that an appropriate settlement can be reached. For either side to be "hiding the ball" as a case goes forward is of no help to either side. And, such activities, which will eventually be discovered, will harden the party’s positions as a result.

The circumstances under which claims are presented to the federal Government - under the scrutiny of fraud, waste, and abuse initiatives - require honesty, fairness, and transparency. Even without the statutes, common sense and good business practices require fair, open, and honest communication with one's customer.

We have seen time and time again, in both claim settlement proceedings and in later litigation, situations in which government attorneys have learned that they cannot fully trust contractors or their attorneys to tell the whole truth and not hide the ball. That inevitably results in a lower likelihood of settlement, and a lower ultimate settlement amount.

By the same token we have seen situations in which agency attorneys were confident that they were being told the truth, and settlements as a minimum were therefore arrived at in a much shorter period of time because every detail in every fact did not need to be checked because a basic level of trust and confidence existed between the parties which did not require it.

What Causes Settlement Impasses with the Contracting Officer and How to Prevent Them?

There are numerous causes that create temporary and permanent impasses with the Contracting Officer in terms of being able to resolve a case at the Contracting Officer level, short of litigation. We review a number of them below.

“We have seen time and time again, in both claim settlement proceedings and in later litigation, situations in which government attorneys have learned that they cannot fully trust contractors or their attorneys to tell the whole truth and not hide the ball. That inevitably results in a lower likelihood of settlement, and a lower ultimate settlement amount.”

Please bear in mind that the thrust of many Government contract claims and resulting litigation is the demand/request that the Government pay additional funds beyond the original contract price. It is surprising  how many people/contractors are insensitive to this overall fact. When you are asking for more money, you certainly have an obligation to be courteous, thoughtful, and complete in your discussion of the reasons why your company is entitled to those additional payments.

Technical Personnel Positions – Lack of Knowledge of Contract and Proposal Requirements

In many claim and litigation matters with the federal Government, technical personnel of the agency involved may play an overwhelming role in determining whether a contractor’s claim is settled or not settled short of litigation. As we will discuss at many points throughout this course, the contractor cannot allow technical personnel, who are making incorrect decisions, to have the final say on whether a claim is resolved or not.

Many technical personnel are simply interested in getting the best product for the agency from a technical point of view. That is an understandable position. However, problems are created when technical personnel are allowed to go beyond that and state that the "best technical position" is in fact what the Government is entitled to under the terms of the contract. The technical personnel’s demands may simply be incorrect.

The fact that something is the best technical approach, certainly does not equate to the fact that it is what is required by the contract. This is the entire point of competition in federal procurement - to see if contractors in competition can find the means by which to meet just the minimum contract requirements of the statement of work to satisfy the Government's needs and requirements - certainly not the best technical approach. This is in many cases completely at odds with the way engineering and other technical personnel approach their work and Government procurements specifically.

There are two approaches to dealing with this problem. One approach is to try to convince technical personnel that the contractor's position is correct - that it is proposing to do what is required by the contract.

The other approach is to politely disagree with a technical person, and go directly to the Contracting Officer and/or legal advisers, to convince them that the technical person is overlooking what the contract/proposal originally required as put in place through competition. This can be a sensitive course to take, but one which is necessary if you are unable to convince the technical person to change their position.

A brief statement of your position and citations to the contract’s statement of work, and/or the proposal as originally submitted can be of great assistance in convincing contracts and/or legal personnel that the technical personnel's demands are ultimately at odds with the contract’s requirements.

This can be an extremely difficult situation if the technical person involved is senior, the head of a technical group, and/or the head of an engineering discipline at the Government's facility.

Preventing Negative Audit Reports

Audit reports that are negative to a contractor’s position with respect to its claims or upcoming litigation can be a serious impediment to the resolution of a case.

Contractors must anticipate this possibility and deal with it proactively. They cannot wait for a negative audit report to be sent to  the Contracting Officer since at that point it will become very difficult to surmount the auditor’s written position.

The contractor needs to map out a program for dealing with the input that is going into the audit report before the auditor carves his or her position in concrete and provides negative opinions in a report. There are many ways to do this, including the following issues that contractors should consider:

Be Involved with Auditors

Does the auditor understand the claim? Auditors must prepare fair and evenhanded audit reports. Insist upon exit and entrance interviews. Have people available who can explain the claim and the contractor’s basis for it. Do not leave the auditors to deal with your accounting issues by themselves. Otherwise they will not understand the whole picture, thereby increasing the opportunity for mistaken impressions.

Provide Senior Personnel for Meetings

Consider having senior personnel present while the audit is taking place. Those senior personnel who are available and aware of the  claim’s contents should meet at least twice a day with the auditor when they come in and when they leave at the end of the day to be sure all of their questions are answered, necessary documents have been provided, and perhaps most importantly to insure that the auditor’s questions are answered correctly and are not left to mere speculation on the auditor's part.

Correct an Auditor’s Misimpressions in Writing

“Do not leave the auditors to deal with your accounting issues by themselves. Otherwise they will not understand the whole picture, thereby increasing the opportunity for mistaken impressions.”

If an exit interview or transactions during the course of the audit show serious misimpressions on the auditor’s part, it is not too late to provide information rebutting such misimpressions in writing to the auditor, to the auditor’s supervisor, and/or separately to the Contracting Officer. It is possible to turn these situations around even late in the process before the final audit report is issued. Contractors should make all attempts to do so if they anticipate a negative report.

The Impact of a Negative Report

Negative audit reports can have a more benign impact in claims areas - when it is easy to see that the auditor is objecting only to certain costs, but is not aware or making any judgments with respect to the merits of the claim for additional work under the various contract documents.

In contrast, in the defective pricing area the auditor is making audit judgments that in many cases are in effect the substance of whether the contractor is right or wrong on entitlement with respect to defective pricing. These situations can be extremely difficult, and the auditor has much more authority. The Contracting Officer is much more reluctant to overrule or disregard the auditor’s conclusions on such matters.

Therefore, a game plan must be established to determine what to do in the event a negative audit report is issued. Moreover, given the serious impact a negative report will have upon the company, senior management must be more involved and pay even greater attention to audits that involve cost or pricing data matters.

User Distress – Confusion as to Product/Service

In many Government procurements, there is tension between technical personnel involved in the procurement, the Contracting Officer and other administrative personnel, and the ultimate users of the equipment, supplies, or services. In every claim situation, the contractor needs to be sensitive to the interrelationship and dynamics of the situation involved if it wishes to resolve its claim short of litigation. Failing to deal  with all stakeholders in a situation can result in a serious impasse that can obstruct settlements.

Focusing specifically on the ultimate users of the equipment or services being procured is warranted. Forget about what the contract states - forget about what technical personnel think. Is the user happy or unhappy with the equipment it believes it is going to get? Many times the user also suffers from miscommunication problems with Government personnel. The user becomes concerned and upset if it believes it is not going to get what it needs to perform its mission.

All of these are serious situations with respect to the user. It is the  user who can influence and decide whether a program or contract is terminated or whether claims are paid. Contractors must communicate with the user by sending in necessary personnel to explain to the user what the contract requires or does not require, how the contractor is trying to meet their needs, and how they are working towards solving performance and other problems. It is a serious mistake and a great risk  to ignore a user’s influence in a procurement situation involving claims.

Users are often unfettered by concerns about the contract or other issues - they just want a product that performs to their needs. These goals and objectives by the user are often completely inconsistent with the entire Government procurement process. Often contractors need to engage in a serious education program for the user so that they understand what the contractor is really delivering, for which it is being paid at the lowest competitive price.

Preventing Bad Communications at All Levels

The authors of this manual have been analyzing contractors’ claims for a combined total of 65 years. Both of them continue to be amazed at the terrible communication that takes place in even written documents, setting aside oral communications in which it is even easier to be obscure.

We see claims submitted that are virtually unintelligible in terms of the description of the basis of entitlement, accounting proof, or both.  And yet contractors expect Government Contracting Officers to review these claims, evaluate them fairly, and pay. That is simply not going to happen when claim documents present serious communication problems.

As a minimum, major claims that are submitted should be “red teamed" by the company in the same manner as proposals. Outside individuals not working on the program in the company need to set aside time to read the claim to be sure it is clear in setting forth what is being requested before the claim document is actually submitted. Just as the company does this with new business proposals, it should do it as well with major requests for proposals/claims going to the Government.

In addition, as can be seen from the foregoing, there is room for major miscommunications between all principal players. The contractor must be on guard to see that those miscommunications do not occur because they will negatively affect its claims in many instances. Some suggestions to avoid this are as follows:

Periodic Updates

Contractors can submit one or two page documents to the Contracting Officer, with copies to all pertinent personnel, once every several weeks while a claim proceeding is in process.

Face-to-Face Briefings

The most important personnel should probably be briefed on the Government side periodically at least once every several months as a major claim proceeding takes place.

Correction of the Record

As soon as the contractor sees major miscommunications developing, he needs to address those in writing, and send them to the Contracting Officer, and all other pertinent and interested agency personnel. The sooner a misstatement or miscommunication is corrected, the least impact it will have on the claim proceeding.

Too Large/Too “Broken” a Procurement

From a claims and litigation point of view, the size of the procurement, and the status of its technical deterioration, can seriously affect whether claims can be resolved or not.

Perhaps the best example of this is the A-12 litigation. The  contractor found itself trying to resolve litigation and claims in which the former Secretary of Defense (Mr. Cheney) had directed that the contract be terminated for default. The Secretary of the Navy had arrived at a contrary position. The technical personnel involved were convinced that the specifications could not be met. The Navy operational personnel however wanted the plane, but with improvements. This is an almost impossible situation to deal with from a subtle point of view.

As a result there have been numerous decisions: McDonnell Douglas Corporation v. United States, 35 Fed. Cl.  358 (1996); 40 Fed. Cl. 529 (1998); 182 F.3d. 1319 (1999); 50 Fed. Cl. 311 (2001); 323 F.3d. 1006 (2003).

The contractor tried throughout the litigation to resolve the dispute at some reasonable price, but was unable to do so. The fact that there were the foregoing contentious circumstances, as well as something in the range of $2,000,000,000 at issue, greatly limited the chances for resolution.

However, it is important not to become frustrated if it appears that the situation is impossible to resolve. We have seen numerous large and broken procurements settle with respect to countless claims and counterclaims if the parties remain engaged and focused on settling the case, even throughout the litigation. We simply provide the A-12 litigation as an example of the difficulties that such complex scenarios present.

The Positive Side of an Impasse — A New Chance

There is a positive side to an impasse — you have the opportunity to try every possible solution to arrive at a settlement with the Contracting Officer. You have tried various things, which apparently have not worked. That means it is time to move on and try different approaches. Some of those may be presented while the case is at the Contracting Officer level before litigation, while others involve starting the litigation process.

None of these should be viewed with particular trepidation — Congress established the system. The system is in some respects more predictable than in commercial contract litigation.

Remember also that you have little choice in the matter. If the Contracting Officer has offered nothing, or a completely insufficient amount to resolve the claim or other dispute, your only option — other than pressing forward — is to accept what the Contracting Officer is proposing. That is an unacceptable solution.

Settlement Approaches to Resolve Contracting Officer Settlement Impasses

This section discusses various approaches that are available to resolve settlement impasses, assuming the parties are still speaking to one another, and their relationship is not completely broken. That should not happen in any event no matter how much the parties disagree.

Both parties should remain talking, and still be receptive to hearing what the other side has to say about a resolution. The Contracting Officer and his agency staff know that the matter is not going to go away without litigation. Experienced Contracting Officers understand that if a resolution fails, their work may actually increase because of their required presence and duties in support of litigation. They will continue to be the agency's contact point, and to some degree will serve as the manager of the litigation at the agency. Their regular job will also continue at the same time.

Supplemental Claim Documents

As long as the Contracting Officer has not issued a negative final decision, there is no prohibition whatsoever in revising documents that have been certified as claims, or before that in revising uncertified REAs.

Indeed, as can be seen from the above discussions, the contractor should be looking for situations in which documents should be revised or at least supplemented based upon the feedback received from various agency stakeholders.

If the claim is over $100,000 and has been certified, it is likely a good idea to submit an additional certification with the revised or supplemental document. While arguments exist that only one certification is required, many agencies believe an additional certification is called for when new documents are submitted, and there is no reason to delay the process by not doing so. If it is clear that the same claim and same set of factual evidence are involved, it is unlikely that the Government will be able to argue that the submittal of a second certification somehow tolls and restarts the interest clock again from the date that the new document is certified.

Position Papers

Position papers are a type of informal statement, often submitted on plain white paper without letterhead, which set forth a summary of a particular point or series of points. Contractors should be prepared to use these types of documents freely throughout the claims negotiation and settlement process. There is no need to submit a new claim or a claim revision if the contractor is simply trying to explain something to someone in the agency decision-making process. Often a one or two page document that simply explains a claims position in writing will solve a particular problem.

In addition, in actual settlement negotiations it may be wise to have written out on separate individual sheets of paper a number of different settlement options that would be acceptable to the contractor. It is often unwise to assume that only one settlement approach will work as it is impossible to predict the various agenda which may exist inside the agency. Work with your team at the contractor’s plant, and put down in writing and be prepared to negotiate on numerous different settlement approaches. Why limit yourself to one approach?

“We continue to be surprised at the number of cases that fail to settle at the Contracting Officer level, but are then successfully resolved with more senior people in the Contracting Officer’s chain of command.”

Senior Agency Meetings

There is no reason to stop in your settlement efforts at the expiration of your dealings with the Contracting Officer. While the Contracting Officer should obviously receive the most attention in terms of convincing them as to the merits of your particular position, they may not be in a position to settle what others are capable of settling in the agency.

Going to See Senior Agency Personnel, Who May Have a Different Agenda

We have seen numerous situations in which more senior agency people with a different agenda than the Contracting Officer have entered settlement negotiations that resulted in different or more meaningful discussions.

For example, it is common for senior contracting people in an agency to have particular goals to meet as to the number of claims the agency has pending or the amount of disputed situations that must be resolved in a particular time period. How do you know whether you might benefit from these goals, unless you press higher into the agency?

Involve the Contracting Officer in the Process

We are not suggesting that the Contracting Officer be simply shunted aside, and not told about your approach to more senior-level officials. This makes no sense in any event because he or she will certainly find out about such discussions.

The appropriate way to handle this situation is to meet with the Contracting Officer and tell them that you cannot accept their offer because it is far too low, will not resolve the problem, etc. Show the Contracting Officer the courtesy of meeting with them or calling them personally to explain what you are being forced to do. Tell them that you will ask the more senior people to invite them to any meetings that are held. This is likely going to happen in any case because the senior people can only get their agency information through the Contracting Officer and their staff.

Dealing with Briefing Documents

When you go to see senior agency people, take a several page briefing document - a position paper or white paper as discussed above. Send that document before the meeting if at all possible to both the Contracting Officer, and the more senior agency person you are meeting with. Go to the meeting with an open mind and explore whether the  more senior person has a different agenda than the Contracting Officer.

Do not stridently criticize the Contracting Officer - that accomplishes nothing. Everyone knows you do not agree with the Contracting Officer - otherwise you would have settled the situation, and would not have had a reason to meet with the more senior agency official.

Settlements to Occur with this Approach

We continue to be surprised at the number of cases that fail to settle at the Contracting Officer level, but are then successfully resolved with more senior people in the Contracting Officer's chain of command.

Congressional Approaches - Do They Work?

Congressional approaches can definitely cause settlements. But, a Congressman or Senator cannot direct an agency to settle a case. What they can do is focus people as to the various issues in the case so that the parties are then able to arrive at a settlement on their own. Is this a distinction without a difference? We think not.

While 20 or 30 years ago, a Congressman or Senator would think nothing of picking up the telephone and calling an agency person directly to tell them to settle a case or else, that simply is not done today. There have been so many ethics investigations related to these types of issues, particularly if there is some quid pro quo involved, that the strong arm approach is almost never utilized. In many instances, it is not necessary.

When a Congressman or a Senator simply writes to an agency about a particular contract, and nothing more is done, a congressional staff representative in the agency simply responds based upon information that the Contracting Officer, and perhaps an agency legal officer provide. This accomplishes virtually nothing in many cases.

A good Congressman or Senator and their staff will be agreeable to following up orally after a letter has been sent to state how important this is to the particular constituent. Once the response is received, it is also not uncommon for staff or the Congressman or Senator to meet with the agency personnel involved, including the Contracting Officer, to try to understand what is happening and why the case is not being settled.

There is no prohibition to a Congressman or Senator gaining information on behalf of their constituent. The problem occurs when the Congressman or Senator attempt to strong arm agency personnel into settling. Statements such as “if you don't settle this case, then something is going to happen” are viewed as inappropriate.

What about a situation in which the Congressman or Senator has control over the agency's appropriations through their committees or other related issues? In those situations no strong-arming is necessary.

Many individuals would tell you that Congressional interference in the disputes process is completely useless. Agencies just blow off Congressmen and Senators. We do not believe that is correct.

But, the one thing that is certain is that enough pressure and inquiries by Congressman and Senators will cause an agency to decide an issue. You may not be able to predict whether the decision will be favorable or unfavorable to the constituent, but the agency will decide simply to avoid being viewed as tardy. That was the fundamental reason that the Contract Disputes Act was passed in the first place.

Threatening Litigation

Paid Staff Attorneys

Agencies have staff attorneys who are paid and available to work on contract issues. The agency trial attorney's office has paid staff attorneys who are also available. Threatening litigation is therefore not as helpful as it might be in a commercial setting where the other side knows they will incur significant additional expenses unless they settle the dispute.

Factual Information as to Why You Must Litigate

Threatening is probably the wrong word to use. What about advising the other side in a businesslike fashion that “if the matter cannot be resolved at the Contracting Officer level, the company has no choice but to push the matter into litigation because there is such a substantial amount of money at stake that it will affect the company financially".

Is this not another way of conveying the same information, but in a more meaningful context? We believe so. We also believe that it is appropriate to tell the agency exactly this type of information if it is truthful and correct.

Agency Internal Reviews – “Claims” Boards and Similar Bodies

It is not at all uncommon for agencies to internally manage the claims/disputes process by various methods. You need to know what method of management is being utilized by the agency involved.

For example, if you have an Air Force case that is heading to litigation, the trial attorney's office at Wright Field will often be consulted about the case before the final decision is issued. That is an opportunity for yet an additional approach to resolve the litigation. This is particularly true if the case is large -- agency trial lawyers want to get out of the final decision process if possible. If the case involves an Air Force default terminations, a pre-approval by the trial attorney's office is often required before the default can be issued. This is simply the agency’s attempt to manage and prevent mistakes by less experienced personnel. It is a wise procedure.

If you have a Navy case, and the case passes a certain dollar threshold, it is reviewed by a claim’s review board before the final decision is issued.

Many agencies have internal review procedures - for example, there are agencies within the Navy that require claims over $1 million to go through a specific review and approval process before litigation can be instituted.

While these types of internal reviews have nothing to do with the Contract Disputes Act - and they cannot affect the 60 day clock that is discussed previously and below - they are important opportunities to resolve the case and you should pay attention to them and know what they are in the individual agency at issue. If you do not know, you may simply inquire as most Contracting Officers will tell you what the approval procedures and dollar thresholds are.

Time Consumption

The materials set out in this section are highly subjective. You should consider your own individual circumstances and make your own decisions. We offer these materials as a rough guideline only.

It is not at all unusual for a claim in the $1million to $2 million range for extra work to take six months or more to resolve at the Contracting Officer level. This assumes of course that the contractor is willing to work with the Contracting Officer for that long. It is difficult to say that six months is too long to resolve a claim short of litigation when you consider the total time that may be involved if the case has to go all the way through litigation, which could be several years or more. Therefore, six months to work with the Contracting Officer is not necessarily unreasonable.

What should the Contracting Officer be expected to do during the six-month period?

• They should review the claim and give the contractor specific feedback of additional factual or accounting data that is necessary.

• They should schedule the DCAA audit and press DCAA to do it in a timely fashion.

• They should gather up necessary technical, factual, and eventually audit information, and be prepared to meet with the contractor for an adequate period of time to see if the case can be settled.

• They should be prepared to stay in session for a sufficiently long period of time, i.e. more than an hour  or two, to see that the case has a fair opportunity for settlement.

If the Contracting Officer is unwilling to do any of these things, or do them all in a timely fashion, it would not be at all unusual to see a claim consideration at the Contracting Officer level stretch out to a year, to 18 months, or more. We have seen that happen frequently by companies that are willing to let the Government proceed at its own pace.

The hard decision that needs to be made is how long a period of time, beyond reasonable amounts of time, the Contracting Officer will be given to do various types of activities. If the Contracting Officer is significantly overworked, but is a fair individual, a contractor may choose to wait and take additional time to resolve the matter. If the Contracting Officer has been difficult to deal with, abrupt, not interested in resolving claims, and then drags their feet in performing the necessary tasks outlined above, the contractor’s approach seems fairly clear.

Actual Litigation: Using the CDA 60-day Rule for Final Decisions.

As outlined above, some Contracting Officers will allow a claim proceeding to go on for an interminable period of time. We have actually had Contracting Officers propose on larger claims to take several years to decide the claim. That is obviously unreasonable and clearly not what the Contract Disputes Act requires.

The Contract Disputes Act of 1978 states that a Contracting Officer will decide a claim within 60 days of being filed and certified, unless some reasonable additional time is necessary. See FAR, 33.211 - Contracting Officer's Decision:

1. The contracting officer shall issue the decision within the following statutory time limitations:

   1. For claims of $100,000 or less, 60 days after receiving a written request from the contractor that a decision be rendered within that period, or within a reasonable time after receipt of the claim if the contractor does not make such a request.

2. For claims over $100,000, 60 days after receiving a certified claim; provided, however, that if a decision will not be issued within 60 days, the contracting officer shall notify the contractor, within that period, of the time within which a decision will be issued.

3. The contracting officer shall issue a decision within a reasonable time, taking into account--

   1. The size and complexity of the claim;

   2. The adequacy of the contractor's supporting data; and

   3. Any other relevant factors.

4. The contracting officer shall have no obligation to render a final decision on any claim exceeding $100,000 which contains a defective certification, if within 60 days after receipt of the claim, the contracting officer notifies the contractor, in writing, of the reasons why any attempted certification was found to be defective.

5. In the event of undue delay by the contracting officer in rendering a decision on a claim, the contractor may request the tribunal concerned to direct the contracting officer to issue a decision in a specified time period determined by the tribunal.

6. Any failure of the contracting officer to issue a decision within the required time periods will be deemed a decision by the contracting officer denying the claim and will authorize the contractor to file an appeal or suit on the claim.

This requirement is generally enforced by the Boards and the Courts. Indeed the Boards and Courts seem to take a somewhat different approach.

At the Boards of Contract Appeals, the contractor may appeal at the end of the 60-day period. And, the Government may object that it needs some initial additional period of time. If so, the Board will most  often give the Government an additional 30 or 60 days to issue a final decision, and then hold that it is proceeding without a final decision if it is not forthcoming.

At the Court of Federal Claims, if the contractor files after the 60th day the Court generally does not inquire further about the Contracting Officer’s final decision.

Appealing for “Refusal to Issue” a Contracting Officer’s Final Decision – Strategy Issues

Would you want to take the additional time to wait for a final decision if the Contracting Officer said he would be issuing it in 90 days? The answer is probably yes if you had some confidence that he would do so. In addition, it is possible that the final decision will have useful information in it and/or make a partial allowance of the claims. The FAR, 48 CFR 33.211, provides that the Contracting Officer is supposed to make partial payments in your favor if he sees merit in a portion of the claims.

What is a reasonable additional time past the 60 days for a Contracting Officer to decide?

As indicated above a request by the Contracting Officer for another 30 to 60 days past the initial 60 day period might be reasonable for the contractor to grant. However, we have seen situations in which Contracting Officers have said affirmatively “I am not deciding this case within 60 days and it will take me an additional year to review the materials or more before I decide”. The answer in that situation is simple - file a notice of appeal.

Preparing a notice of appeal for the refusal to issue a final decision can easily be done in a one page submission. The case will be docketed by the ASBCA, and the Government trial attorney will in almost all instances become immediately involved. As discussed below, that provides additional opportunities to settle the case.

See the following notice of appeal from a Contracting Officer’s refusal to issue a final decision:

To: Recorder, Armed Services Board of Contract Appeals

cc: Contracting Officer

Re: Appeal of _____________________ 

# _____________; Contract

NOTICE OF APPEAL

CONTRACTING OFFICER'S FAILURE TO ISSUE FINAL DECISION WITHIN 60-DAY PERIOD PROVIDED BY THE CONTRACT DISPUTES ACT

Dear Sir:

By documents dated ____, and delivered to the Contracting Officer on ___, the above referenced contractor, ___, asserted a claim against the United States acting through the Department of Defense, in the amount of $ ___.

The contractor provided the detailed basis for its claim resulting from the Government's failure to pay invoices due for contract performance.

The Contracting Officer has not issued a final decision on this certified claim within the required 60 days of receipt as required by the Contracts Disputes Act. Nor has the Contracting Officer requested additional time in which to issue this decision. The Contracting Officer is fully informed of the basis for the contractor's claim.

Accordingly, the contractor requests that the Board docket this Appeal from the failure to issue a final decision and file the attached Complaint, requiring the Government to answer within the 30-day period. In addition, Appellant requests that the Contracting Officer be required to provide her final decision within the next 30 days as well.

Respectfully submitted,

cc: Contracting Officer

In comparison, the following is an example of a standard Notice of Appeal in which a Contracting Officer has issued a final decision.

To: Recorder, Armed Services Board of Contract Appeals

cc: Contracting Officer

Re: Appeal of # _; Contract

NOTICE OF APPEAL OF CONTRACTING OFFICER'S FINAL DECISION

Dear Sir

We hereby appeal the Final Decision dated , received ________, issued by the Contracting Officer with respect to the amount of the stated debt owed by________(copy attached).

This decision asserts  a $________ debt from progress payments over the amount of inventory received and taken from ________ Inc.’s plant following a default termination. The Contracting Officer’s decision is erroneous in law and fact.

The Government has received far more value, and the Contractor has expended far more costs than are reflected in the progress payments of $________. The Government owes the contractor additional payments for this value of the inventory, and the contractor’s cost input in excess of $ ________.

Accordingly, the contractor requests that the Board docket this Appeal.

Respectfully submitted,
cc: Contracting Officer

Alternative Dispute Resolution (ADR) Presentations

Numerous Government agencies state in their regulations that they are committed to alternative dispute resolution processes. The Board of Contract Appeals and the Court of Federal Claims have alternative dispute resolution processes. Many Government agencies - the Corps of Engineers is a good example - aggressively press for the use of alternative dispute resolutions at the Contracting Officer level.

While alternative dispute resolution is a good idea overall, it needs to be conducted in a thoughtful and time efficient fashion. Otherwise it has a tendency to stretch on for too long, and to be disruptive rather than helpful to the overall resolution of the case at issue. Thus, embracing alternative dispute resolution at all costs and without reserve is a mistake for both sides.

What is alternative dispute resolution? Alternative dispute resolution is any non-judicial negotiated solution of a dispute, and the exchange of information supporting it.

Discussions with the Contracting Officer before he or she issues a final decision are a type of alternative dispute resolution. When an attorney goes to the trial attorney's office to informally present additional information, and presses for the settlement of various issues, that is also a type of alternative dispute resolution.

A more formal alternative dispute resolution is one presented to a designated ADR member of a Board of Contract Appeals or Court of Federal Claims.

Many other state and federal Courts have ADR programs in which individual types of mediators are assigned to conduct alternative dispute resolution sessions, which litigants are required to try prior to moving on with more formal Court proceedings.

If an individual attorney or other dispute facilitator is involved, they will often impose some procedures for the ADR process. For example,  they may designate that each side has an hour to make its opening presentation, and another hour to present its witnesses. After their presentations, the ADR facilitator will then meet individually with each one of the participants.

Each participant is required to have a decision-maker present, such as the company’s president, who can settle the case and has authority to bind the company. Individual procedures can become even more  formal than the example above, but we believe that keeping the process more flexible is a better way to proceed.

In many instances, the principal benefit of alternative dispute resolution proceedings is that the parties get to hear their case, as well as the other side's case, in a summary fashion, and then get to meet with the facilitator to get their reactions to the presentations. This will often cause  a settlement because parties are surprised that the mediator has so many questions or issues or problems with one or the other parties’ positions, thereby highlighting future risks to their cases.

We set forth below some specific, common questions that arise with respect to the use of ADR, and our views as to how they help or hurt the dispute resolution process in federal Government contract cases:

1. In-House Experts Versus Outside Experts: Trade Offs

One fairly common question that companies have to decide is whether it would be best to use their own technical experts, or to hire outside experts for ADR presentation purposes.

The absolute minimum cost for hiring an outside expert, having them become familiar with the technical issues or other issues involved in the case, and then having them appear at an ADR proceeding, will probably be in the range of $5,000 - $10,000. Do not be surprised if the cost is much higher than that depending upon the time involved, the status of the expert witness, and their firm's overhead structure. Often university personnel, if they can be found, are the most cost-effective for this type of work.

Using an in-house expert is a possibility and a low-cost approach. The problem is that all who participate in the ADR will assume that in- house experts will skew their findings to the party line, and therefore they may not be viewed as credible as an outside expert. The decision to hire an outside expert may simply be constrained by the economics of the situation as it relates to the amount of the claim at issue.

2. Senior Agency/Contractor Personnel

As indicated above, most ADR facilitators will require that each side have people capable of settling the case present at ADR proceedings. It is common for both sides to try to evade such requirements to some degree because it is difficult for senior level decision makers to work enough time into their schedules to participate in ADR proceedings. Both sides must police this situation to be sure that the other side is not failing to honor such requirements.

It is not uncommon for senior contractor and senior agency personnel to decide to attempt to resolve the matter themselves, or together with the assistance of the ADR facilitator, after hearing the arguments and evidence presented in an ADR proceeding. In addition, it is appropriate for the ADR facilitator to meet separately with senior officials from the contractor’s side and then with the agency's side. Anything that works or has the potential for working is acceptable. There are no rules or requirements; ADR may be conducted in any fashion that the parties choose and agree upon.

Mediation

Mediation can be as simple as having a mediator meet informally with both sides to see if a settlement can be resolved, or it can be as complicated as having a mediator structure multiple presentations before both sides so that each side learns the strengths and weaknesses of their positions before negotiations commence.

One of the authors was involved in a large mediation in which the mediator took informal testimony for 14 days from the parties on various elements of their claims so that each side could describe the good points as well as the bad points of their claims in front of each other. The claims and the parties’ presentations were then reviewed together with the mediator’s comments in a final mediation session. The mediator also provided the parties with a one hundred page analysis of the informal hearing so that they could review it before the mediation started. The case was ultimately settled.

Mediations may take a day or they may take several months to conclude. The question is whether the parties are making progress in working towards an ultimate resolution of their dispute.

Economic Issues

Both mediation and ADR have unique benefits for the contractor especially if they are only going to take a day or so before a Board or Court assigned ADR person who does not need to be compensated. If the contractor has a $30,000 claim, it can often not afford to try that case before the Board or Court. But, the contractor can certainly go to mediation for a one-day session after it has filed its complaint to see if the case can be settled.

Choice of Mediator

Choosing a mediator can be difficult. The person selected needs to be someone completely independent of the dispute, and should also be someone who has no current business interest or connection, nor future business potential, to the mediation parties.

A more senior person, who has a good deal of experience in the particular area in dispute, is a likely choice. If the dispute is of a highly technical nature, a university professor who specializes in the technical discipline at issue, even though he or she is not a lawyer, might be a good choice. If it a legal dispute is involved, a very senior lawyer or law school professor might be a good choice.

It needs to be someone that the parties will respect when they hear the mediator say "let me explain to you the problems that exist in your case".

Range of Agency Programs

As stated above, most Government agencies, the Boards of Contract Appeals, the Court of Federal Claims, and most of Federal and State Courts have ADR/mediation programs of some sort or other. You should check the agency’s regulations and/or inquire. The issues set out above are equally applicable to all of these situations.

Programs Taking on a Life of Their Own

One of the things on an overall basis to be on guard about in entering an ADR mediation type approach is how long it will delay any existing proceedings, and how much work effort and preparation are involved.

A mediation that is going to take three or four months, and that involves a significant amount of preparation, should be questioned. If the case is not tremendously large, those resources could perhaps be put to better use, such as for trial preparations or separate settlement negotiations with the other side’s trial attorney.  It is the ADR facilitator  who either makes the mediation/ADR process work or not work. Unfortunately, given economics, it may not be possible to pay the price for that depending upon the size of the case at issue.

A Strategy for Using the ADR Process

As can be seen from the foregoing discussion, there is more strategy in the actual ADR process beyond simply making the decision to enter into and do an ADR. The sections that follow discuss the detailed mechanics of the actual ADR process. These areas are also highly subjective. Other techniques will work. We are simply stating our views as a starting point for discussion.

There is one point on which we are very firm - one individual must control ADR procedures on each side once proceedings begin. There cannot be an "all skate" type approach in which everyone gets to talk and say whatever they want. That will completely defeat the purpose of ADR. Yet we find many people are taken by the informality of the ADR proceedings, and within a day uncontrollably find themselves wanting to explain everything during the ADR proceeding. They also want to freely respond to questions and the other side’s points. None of that will work.

As discussed below, there needs to be one person in charge of the ADR plans, and that one person decides when flexibility is required. Discipline and sticking to the plan are the bottom line.

Outside Expert on the Issue of Settlement

An initial decision that the company will need to make is whether it can afford to have an outside evaluation of its case in order to obtain recommendations as to settlement and settlement approaches. There  are numerous companies that provide such services.

Our reaction is that much of this is cost driven. If it is a very large case, probably above $10 million, it may be economically justifiable to have evaluations performed and recommendations given. Below that amount, it may not be cost effective.

If you have a large number of individual cases that appear to be recurring, there are services that give overall approaches and analysis techniques for dealing with and managing one's litigation. They should also be considered. They are not inexpensive.

Remember also that it is possible to do this on an inexpensive basis by using lawyers or contracts people in other divisions of the company or in other sister companies. People with long term experience in dealing with these types of issues can offer helpful suggestions and give helpful evaluations of where the case might be settled most productively.

Sticking to the Plan, but Being Flexible when ADR Commences

As can be seen from the problems set out below, which we will work through soon, commencing ADR in the middle of litigation requires a plan. The plan may be as simple as deciding to wait to start ADR until an initial round of discovery has taken place so the contractor has had a chance to accumulate the maximum amount of favorable material.

The plan may be more complex; it may relate to the merits of the case: this case so complex that it will be so expensive to try that ADR must be forced early in the proceedings.

The contractor needs to make an assessment of how long it will take to get the company’s money it is entitled to recover. Two years - three years? In such a case, if the contractor is extremely pressed financially, it almost has to try an ADR proceeding to recover now or in the next several months.

These are all strategy decisions which must be considered. They then translate themselves into tactical decisions once the ADR proceeding starts as discussed below. We also recommend that you stay flexible and continually reevaluate your ADR implementation plan. There may be reasons to change it as you move through the process; is so, they should be good reasons.

One Spokesman at the ADR

As mentioned above, once an ADR starts there needs to be one company spokesman (but multiple quiet providers of information to the spokesman is fine). We cannot over emphasize the importance of this point. We have seen ADRs and similar proceedings drastically impacted  in a negative fashion by the compulsion of people to blurt out information, argue with people, engage in mindless disputes, etc.

All of this is counterproductive and contrary to the basic ADR approach - a simplified presentation that focuses on the issues and is structured to convey a point. The last thing one needs is a free-for-all in which everyone is debating every issue. That can be reserved for litigation if necessary.

Yet people feel compelled to talk.  It is almost as if they cannot stop-they are compulsive about responding to everything. An ADR presentation and session does not respond everything— it focuses on the key issues in a structured fashion.

Caucuses

The solution to the compulsion to talk is to tell every individual that they have the right to call a caucus in the midst of the ADR proceeding. People can then step outside the meeting room to discuss anything compelling, make adjustments as necessary, and then go back into the meeting room to proceed.

The right of every individual participating in the ADR to call a caucus for something they believe is compelling and needs to be discussed acts as a safety valve and shuts off the compulsion of people to blurt things out.

One Contract Person - Their Records and Familiarity

It is almost mandatory in a contract dispute that one knowledgeable contract person be assigned and given sufficient time by the company to work on the case. Contracts people will often resist this. They view working on a case for a contract that is in trouble as a dead end assignment. Companies must make commitments to their individual employees so that they feel comfortable working on a case. Individual employees must ask for this.

Once these actions have taken place, the contract person can be of invaluable assistance to the lawyers and others in helping to prepare the case. They are a type of super paralegal, marshaling facts, gathering documents, and helping the lawyers stay out of trouble for lack of familiarity with the company's records and procedures.

If the case is a defective pricing case - perhaps the individual should be a finance person. The fact is that one company person needs to be in charge to support the litigation and must be available to work on it on a day-to-day basis.

One Source of Information Only

As outlined above, there should not only be one spokesman but only one output source of information once the ADR proceeding or a contract dispute starts. If company officials receive inquiries for information, they should be referred to the lawyer or the contract person in charge. Requests for information from numerous sources will come particularly as the dispute gets larger - they should be answered politely and referred to the people who have the information. A simple "I am not sure I know the answer to that question. Let me refer it to the people who are working on it" will solve the problem and not offend anyone.

No Finger-Pointing – Facts Only

The entire disputes resolution process, and most particularly the ADR, needs to be conducted in a professional fashion. There are times to state that one disagrees with another's position. It can be done that simply. Getting emotional and venting during the course of an ADR is a guaranteed no win situation.

Example:

We recall one ADR proceeding in which we were making a one- day presentation to a retired Federal District Court Judge. The other side - the Defendant - became so frustrated that they started yelling and screaming in the midst of the proceeding not only at the Plaintiff, who the authors represented, but more importantly at the retired Federal District Court Judge for not doing his job. This was simply emotion out of control.

The Federal District Court Judge met separately with the Plaintiff, and stated that he was sorry for the outburst, and now understood the problems that the Plaintiffs had been having in getting the Defendant to deal with their claims in a professional fashion. The case ultimately settled as a result of the ADR proceeding. There is no doubt that the Federal District Court Judge’s opinion of the case was affected by the emotional outburst, and that as a result the Plaintiff's position was enhanced.

"This is a Bad Situation for Everyone" Approach

Perhaps one of the simplest ways to approach the ADR is to consider that everyone is upset about the existence of the dispute. It is truly a bad situation for everyone - that the matter has gotten so far without a resolution that an ADR proceeding is now necessary. Nevertheless, the ADR proceeding is a way to shut off further unnecessary expense.

It is also appropriate to acknowledge as part of the ADR proceeding that the contractor's performance was not perfect, and that the contractor made mistakes, and could have done better in certain areas of performance. But, that these insights are made with 20/20 hindsight, in which it is always easier to see that things could have been handled differently. Nevertheless, some acknowledgment of fault to a small degree is a helpful, calming factor during ADR proceedings. Claiming perfection and that you were right on all issues is probably not the way to go.

Making Cost Estimates - Value Trade-offs

It is necessary to make cost/time trade-offs for litigation versus an ADR proceeding. Again, there are outside services which will do this, but they are expensive. In modest cases, this is basically commonsense and can be applied by individual company representatives.

Example One

The case involves $100,000 of extra costs that the contractor has expended. The contractor has a good case – there are some estimates for costs or quantum presentations for trial that will likely cut down his $100,000 recovery.

Does this case need to be settled? Yes, for both sides. Neither the contractor nor the Government can proceed with a case that has a face value of $100,000 that may be reduced significantly because of quantum issues in terms of overall recovery.

This may be an appropriate situation for ADR.

Example Two

The contractor has a case in which $2.5 million is in dispute. There are 522 individual constructive change claims involved, for which the company prepared an REA originally and submitted it to the Government. The Contracting Officer denied the claim in total.

It seems likely if the case goes to trial that there are both quantum issues and entitlement issues that would indicate a recovery in the range of about $1.5 million at best. The company's outside counsel is estimating $250,000 to try the case plus expert witness fees.

Is this a case for ADR? Absolutely. Not only are the costs of litigation consuming the ultimate recovery, but in addition presenting the 522 individual constructive changes will be a nightmare at trial. It can be done, but it will require significant input from company personnel and a consumption of their time as witnesses, as well as the costs for outside counsel. Outside counsel may also have underestimated the costs of doing this— that is always an issue ADR should be pressed for at an early point in the litigation.

Example Three

The contractor built a large computer system for specialized delivery to the Government. The system was accepted by the Government, and it performed work for the agency. Six months later the Government contends that there are various items that are not working correctly in the system - the Government is non-specific, and you know it is under great pressure from the user command to make these allegations.

The Government asserts a right under the Inspection Clause to a $1 million reduction in the contract price. You file an appeal at the ASBCA — the Government immediately applies for ADR.

This might well be an area in which you would not want to agree to ADR. If the facts are clear, you could move for summary judgment immediately upon filing your suit. That would give you additional leverage in negotiations or even later in ADR.

Example Four

The contractor provides computer parts for desktop type computers. They are all simple items that could be purchased from RadioShack. But the contractor provides delivery services, as well as offering most favored customer representations as to pricing.

A Government agency orders parts. Some parts are returned as defective. Some people in the agency complain that the parts were not received.

The contractor keeps meticulous records. He knows when parts were shipped to the agency, and can prove it in writing. People have signed for the parts when they were received. In addition, when a part is returned, he knows if it is defective or not. Testing is done, and/or a part is returned to the manufacturer for replacement. Records are kept.

The contractor knows therefore exactly what parts have been delivered and received by the Government. He invoices for them notwithstanding various allegations that parts were not received. In addition, as to the parts that were returned as allegedly defective, he asserts a claim for his administrative costs based upon estimates of what it costs to deal with defective part allegations when it is later discovered that parts were not in fact defective.

The Government refuses to pay the invoices. The Government denies the contractor's claim based upon estimates of administrative costs.

Consider how this situation should be presented to the Contracting Officer, how it should be dealt with if the Contracting Officer denies the claims, and whether an ADR proceeding should be instituted, including under what circumstances such proceedings should be undertaken.

What about simply moving for summary judgment?

Example Five

The contractor is providing ship repair services to the military. An equipment transport ship is being renovated for the Navy. The  work called for is customary and straightforward - it can be performed in a number of ship repair facilities throughout the United States.

A contractor receives the award. He commences work on the ship. The contractor provides for a basic repair package to be done on a fixed- price basis, and then all additional work to be done on a time and material basis based upon a schedule of rates in the contract.

The government issues very few time and material orders, contending that all of the work being required under the contract falls within the fixed-price portion. The contractor contends that there are literally thousands of individual time and material orders required because the work being forced upon him is outside the fixed-priced portion of the contract, which he originally estimated following the statement of work.

The parties are at an impasse - the basic contract work called for $10 million of fixed priced effort. The contractor contends that 1,500 time and material orders are required for an additional $4 million of effort. The government Contracting Officer denies his claim in a final decision.

Consider the institution of litigation opportunities and the process involved in doing so. Decide what your plan is.

Immediately upon filing your complaint at the ASBCA the Navy’s Trial Attorney’s Office asks for the case to go to mediation. Do  you support this request?

Dealing with Subcontractors Affected by Claims/Litigation

As will be discussed at various points throughout these materials, subcontractors’ and vendors’ claims and litigation are intimately related to the Government claim being presented and processed. This is true at all Government agencies because many Government contractors perform principal portions of their work through the use of subcontractors.

If major subcontractors are present in a claim/litigation situation, significant effort needs to be given to dealing with subcontractor issues. If a prime pushes its subcontractors off, and fails to communicate with them, they will find themselves in litigation with their subcontractors in state or federal court.

If the government formally or constructively changes the prime contractors work, it will in all likelihood affect a part of the subcontractor's work and change that as well. The subcontractor will have a request for an adjustment due to such changes to its work.

Therefore, it is a common occurrence to see the prime contractor presenting a claim to the Government Agency that includes several subcontractor claims. This is particularly true in construction contracts, but also occurs in prime/subcontract supply and service contract relationships.

Agency Concerns

The government agency needs to know whether the claims of the sub against the prime are valid, and whether the agency in turn has responsibility for causing various actions during the course of contract performance.

In other words, two immediate questions arising for the government agency when it sees subcontractor claims in a prime claim are:

1. Is the sub’s claim valid against the prime?

2. Is the prime’s claim valid against the government agency for the subcontractor’s cost because the government agency caused those costs to be incurred by the prime?

If the answer to either of these questions is no, then the government agency may not be liable on the sub’s claim to the prime.

Government agencies do not focus adequately on these issues. Often the claim of the sub against the prime is invalid because of legal defenses.

Subcontractor/Vendor Concerns

The subcontractor has issues to consider in terms of dealing with its prime contractor on claims issues. Will the subcontractor agree to have the prime contractor sponsor its claim against the government agency? What risks are inherent in doing that? What rights is it giving up?

In addition, are the subcontractor’s proof and legal requirements  for its claim the same as those for the prime in presenting claims to the Federal Agency? The answer to this question is: They may be the same in a generalized way; but often things are drastically different, i.e.:

• Notice requirements that must be given for subcontractors’ claims versus prime contractors’ claims.

• The lack of a “constructive change” doctrine at the subcontract level.

• The differences in proof and law under the Uniform Commercial Code and in many substantive areas (i.e. inspection, acceptance, and latent defects, to name only a few).

Application of The CDA

The CDA does not directly apply to disputes between subcontractors and their prime contractors, but (as will be explained below) the CDA is of vital importance in determining how subcontractors’ rights are determined under most Government contracts.

If the prime is required to follow the CDA, subcontractors will surely be expected in many circumstances to conform to their prime contractors’ contractual requirements. These issues are discussed at various points throughout the text.

The comprehensive treatment of the intricacies involved in prime/subcontractor award and performance issues is contained in a separate text published by the Contract Research Institute: Subcontracting: Strategies for Primes and Subcontractors.

Certification of Subcontractor Claims

With one limited exception, subcontractors cannot file claims directly against the Government. United States v. Johnson Controls Inc., 713 F.2d 1541 (Fed. Cir. 1983); Lockheed Martin, Inc. v. United States, 50 Fed. Cl. 550 (2001); Harrington Associates, Inc., GSBCA No. 6795, 82-2 BCA ¶ 16,103.

Only where the Government enters into a modification that is specifically intended to benefit the subcontractor, can the subcontractor bring suit directly against the Government. See D&H Distributing Co. v. United States, 102 F.3d 542 (Fed. Cir. 1996). This is a rare exception.

Since subcontractor claims are often caused by Government actions, primes sometimes include clauses (such as the standard Disputes Clause) in the subcontract. These clauses often require the sub to certify its claim to the prime.

Be aware that the sub’s certification alone is not sufficient to meet CDA requirements. See Century Construction Co. v. United States, 22 Cl. Ct. 63 (1990) (prime’s statement that subcontractor, rather than the prime, believed Government was liable was ineffective).

The prime must sign a separate certification to submit the sub’s claim to the Government. This can create problems.

“Admission” Problems

Primes often lack access to the subcontractor’s accounting records, and do not know if the amount requested is actually owed and/or allowable. Likewise, the prime contractor sometimes does not agree with the subcontractor’s position.

If the prime refuses to certify the subcontractor’s claim, the subcontractor may sue the prime in State or Federal Court.

On the other hand, if a prime certifies the subcontractor’s claim and proceeds through the Government contract disputes process, and the Board or Court later rejects that claim, the sub can still proceed to State or Federal Court, and argue that the prime’s certification of its claim, and any submissions made by the prime to the Government in support of the claim, are an “admission” that the sub’s claim against the prime is valid.

Fortunately, for prime contractors, the Courts have attempted to resolve part of this problem in a pragmatic fashion. Primes are permitted to “sponsor” and submit their sub’s claims even if they do not agree with the subcontractor’s legal theory so long as they believe there are “good grounds” for the subcontractor’s claim.

In such situations, the prime must state its belief that certain facts in the subcontractor’s claim are incorrect. United States v. Turner Construction Co., 827 F. 2d 1554 (Fed. Cir. 1987); see also Arnold M. Diamond v. United States, 25 F.3d 1006 (Fed. Cir. 1994).

The remedy for this “admission” problem for the prime is a provision in a “Joint Proposal Agreement” that says if the prime sponsors and submits the subcontractor’s claim, the subcontractor’s recovery will be limited to what it recovers from the Government only as part of the prime’s sponsored claim, and that it waives its right to sue the prime.

Using and Negotiating Joint Appeal Agreements

We have set forth on the pages that follow three versions of joint appeal and defense agreements. Two are standard forms and one is a standard form that evolved after it was negotiated between two parties.

As you look through these forms, you will see that they are favorable to the prime in many instances. That is their initial intent. The prime wants to trade his processing of the subcontractor's claims against the federal Government for an agreement from the sub that they will accept what the Government pays and not sue if the amount is less than the subcontractor requested.

This type of arrangement is made daily among Government primes and subcontractors. They may do this informally or they may do it in writing. As we discuss below, but for the smallest claims, it is absolutely mandatory to so this in writing to avoid allegations as to admissions of a party opponent.

Claim Bases – Basic vs. Complex

As indicated in the opening section, you must make a rational appraisal of whether your claim basis is basic and simple, or more complex. If the claim basis is more complex, a greater amount of activity and work will be required on your part (and accordingly time consumption) to prepare a claim that can be communicated adequately to the other side. Basic claims can be presented in several pages. It is not unusual to see complex claim presentations, typically in which many individual actions created extra work, that include hundreds or even thousands of pages.

The more complex a claim is, the more difficult it often is to settle. The reason is that contractors do not spend enough time, as complexity increases, to educate and present their customer with an understandable basis of why the claim is being pursued, its merits, and supporting accounting information.

Audit Considerations

If the contractor is asking for additional money, and the claim is substantial in size, both the contracting officer, and later the agency’s trial attorneys, will ask for an audit of the claim’s accounting section by DCAA or other agency accounting functions as applicable.

Contractors are notoriously bad in neglecting the audit, and in allowing DCAA or other agency audit functions to produce the audit without being fully aware of the contractor's claim contents, the various supplemental documents that may have been submitted, and without adequate attention to auditors’ questions.

The auditors should be engaged. We are aware of  one construction dispute that ultimately went to litigation and then settled in which the company president made himself available several hours a day to discuss with the auditors the basis of the contractor's claim -- both in the morning when the auditors came in, and each day as an exit basis when the auditors were finishing up. We are convinced that the claim was resolved because the company's president, who was knowledgeable of virtually all the facts relating to the job and the claim, was able to explain to the auditors both factually what took place during the formation of the claim, as well as the way in which costs were incurred and recorded on the contractor's books as a result of claim events.

Do not underestimate the importance of the audit, as well as the importance of having knowledgeable individuals work with the auditors to explain the company's position. Auditors are independent and they will arrive at their own conclusions. They cannot arrive at conclusions in the company's favor unless the company presents all of the information that auditors need to consider. Treating auditors as if they are irrelevant to the claims process or as a negative is foolish.

Audits in Litigation

Indeed, there are times when the company should be aggressive in insisting as part of the claims process or later in litigation that an audit be conducted, and that the audit be conducted under certain terms. See the motion set out below as an example:

BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of _____

Under Contract No._____

ASBCA No.  ____

MOTION FOR THE BOARD TO CALL FOR EVIDENCE: DCAA AUDIT AND GROUND RULES THEREFORE

The Appellant hereby moves the Board to give the Government direction to perform the DCAA audit in a fashion that is fair and reasonable, and will find facts for both sides with respect to the dispute that exists between the parties.

Appellant and Government counsel cannot agree as to exactly what DCAA will do in its audit. Given the issues in this case, it is very important that DCAA conduct its audit in a fashion which will produce evidence of use to both sides in this case. That is DCAA's function - certainly in litigation before the Board - to produce balanced accounting information that fairly reflects both parties’ positions so that the Board may make the ultimate decision.

The Government has recently asserted in its answer and final decision that Appellant has no actual costs/expenditures beyond what has already been reimbursed for the periods in which the Government has failed to pay, and for which it seeks a refund. That is incorrect.

Appellant seeks a proper audit to show that if the Government chooses to not pay Appellant's charges as previously agreed to, it owes the same funds or additional funds as ……… for costs actually expended in performing the contract work in question. The audit needs to be conducted in a fashion which will determine whether that is correct or incorrect for both sides. Appellant has prepared an appropriate Order for the Board's signature.

Respectfully submitted,

Attorneys for Appellant

Honesty, Fairness and Transparency by Both Parties are Key to a Good Settlement.

It is only when both parties understand each other's positions, and their respective strengths and weaknesses, that an appropriate settlement can be reached. For either side to be "hiding the ball" as a case goes forward is of no help to either side. And, such activities, which will eventually be discovered, will harden the party’s positions as a result.

The circumstances under which claims are presented to the federal government - under the scrutiny of fraud, waste, and abuse initiatives - require honesty, fairness, and transparency. Even without the statutes, common sense and good business practices require fair, open, and honest communication with one's customer. We have seen time and time again, in both claim settlement proceedings and in later litigation, situations in which Government attorneys have learned that they cannot fully trust contractors or their attorneys to tell the whole truth and not hide the ball. That inevitably results in a lower likelihood of settlement, and a lower ultimate settlement amount.

By the same token we have seen situations in which agency attorneys were confident that they were being told the truth, and settlements as a minimum were therefore arrived at in a much shorter period of time because every detail in every fact did not need to be checked because a basic level of trust and confidence existed between the parties which did not require it.

Example Agreements

Portions of (Long Form) Joint Proposal Agreement1.

This agreement, effective as of the             day of________, 20     , by and between ______ and _________.

WITNESSETH THAT:

WHEREAS, SUB has performed work for PRIME under United States Government Agency ("Agency") Prime Contract No. _______ (the "Prime Contract" or "Contract"); and

WHEREAS, PRIME and SUB agreed to and executed, on _______[date],  Contract  No. _____(the  "Subcontract")  for  the performance of certain work to be delivered by SUB to PRIME for PRIME's use under the Contract.

WHEREAS, SUB began to perform the Subcontract and incurred costs in connection with PRIME's performance of its Prime Contract; an

[Describe Dispute Claims]

WHEREAS, PRIME and SUB recognize that, absent future consent in writing by Agency, SUB has no right of appeal to or cause of action against Agency in relation to SUB's __________; and

WHEREAS, PRIME and SUB recognize that, pursuant to the Contract Disputes Act of 1978, PRIME may dispute, by written appeal to the Agency Head directed to the Agency Board of Contract Appeals ("Agency BCA") or, alternatively, to the Court of Federal Claims, any adverse determination by Agency in respect to PRIME's __________; and

WHEREAS, SUB desires to submit to PRIME a ________ settlement proposal for all allowable payments for goods and services delivered and costs incurred and a reasonable profit on those costs in connection with 1 [Note: This agreement can, with modification, be used for virtually any type of flow-through claim. This sample agreement is based upon an agreement, which was drafted by a prime contractor and its terms, reflect that authorship. A sub could want to soften some of these provisions] Agency's __________ of the Contract and PRIME's consequent __________ of SUB's Subcontract; and

WHEREAS,  PRIME  desires  to receive SUB's __________ settlement proposal, negotiate with SUB to settle the proposal and submit SUB's said settlement proposal as part of PRIME's settlement proposal to Agency for approval or ratification; and

WHEREAS, PRIME and SUB find it in their mutual best interest to cooperate in presenting SUB's __________ proposal as a mutually-agreed part of PRIME's proposal for __________;

NOW, THEREFORE, in consideration of the foregoing and of the mutual promises and covenants contained herein, it is agreed between the parties as follows:

Submission of SUB's Claim

1. SUB will promptly submit to  PRIME a __________ proposal ("claim")  in  accordance  with  the  terms of the __________, including therein settlements with its subcontractors.

2. If PRIME and SUB agree upon SUB's claim as submitted to PRIME or as subsequently modified, PRIME will submit SUB's claim to the PCO as its proposed __________.

3. At its sole election, PRIME may settle and agree to pay all or part of SUB's claims as submitted or as subsequently modified by SUB without first obtaining the advance approval of Agency.

4. Upon submission of the claim to PRIME and during negotiation in relation to the claim by SUB with PRIME or by SUB or PRIME with the Agency, PRIME and SUB will fully, completely and without reservation share all information and records so that an accurate and complete claim will be provided to Agency for its consideration. SUB will allow PRIME and Agency to perform any accounting reviews or audits of books and records relating to performance of the work in order that PRIME may satisfy its responsibility for settling SUB's Subcontract work effort in accordance with the terms of the Contract. The disclosure of such information and records shall be for the sole purpose of preparing the parties' respective claims and shall not be used by either party in any manner inconsistent with this purpose.

5. IF PRIME and SUB fail to agree upon any part of SUB's claim, PRIME will submit the claim (unless doing so would be a violation of law), as submitted by SUB or modified by agreement of the parties, to the__________ for final resolution.

6. To the extent that the Agency may agree to negotiate with regard to SUB's claim, PRIME and SUB shall carry on any and all negotiations necessary and appropriate in connection therewith.  SUB shall prepare for timely submission by PRIME any additional information and documentation which is requested by the Agency or PRIME in support of SUB's Claim.

7. PRIME and SUB, with their respective representatives, and with each party to bear its respective expenses, shall be responsible for all negotiations which may be required in connection with resolution of SUB's claim during the course of the proceedings contemplated by Paragraph 1 through 6 of this Agreement, and shall have present at all such negotiations their authorized representatives as Agency and/or PRIME may request.

8. SUB shall have the right to accept or reject any settlement or resolution offered by Agency in connection with SUB's claim; except that, with respect to any settlement or resolution proposed by Agency which SUB would accept, PRIME shall have the right to reject such proposed settlement or resolution if such is conditioned on relinquishment by PRIME of any rights arising under the Prime Contract and not involving SUB's work.

9. If the negotiations referred to in paragraphs 6 and 8 above do not take place expeditiously, or if they proceed in a manner indicating to SUB that a satisfactory and expeditious settlement is unlikely, or if any settlement or resolution offered by the Agency is unsatisfactory to SUB, then PRIME, upon SUB's written request, shall request a Contracting Officer's final decision in accordance with the "Disputes" clause of the Contract.

10. PRIME shall permit SUB to take an appeal under the Disputes clause of the Contract to the Agency BCA or Court of Federal Claims in PRIME's name from any decision of the Agency adverse to the interests of SUB whether such decision results from SUB's specific request as aforesaid or from the Agency’s own initiative. PRIME shall notify SUB promptly of any such decision. The appeal by SUB in PRIME's name under this Paragraph shall be in accordance with the Disputes clause of the Prime Contract.

11. Any negotiations with the Agency referred to in Paragraph 6, or any appeal referred to in Paragraph 10, shall be pursued by PRIME and SUB with their own representatives and with each party to bear its respective expenses. The parties shall provide such reasonable cooperation and assistance as may be necessary and appropriate for pursuit of the actions referred to in Paragraphs 1 through 10 above.

12. From any decision resulting from any appeal to the Agency BCA or Court of Federal Claims contemplated by or referred to herein, SUB shall have the right, but not the obligation, of further action in PRIME's name before the United States Court of Appeals for the Federal Circuit. The same right, without obligation, shall accrue upon dismissal of the appeal by the Agency BCA or Court of Federal Claims on jurisdictional or other grounds. In the event that SUB elects not to exercise the right of further action contemplated by this Paragraph, PRIME shall have the right, but not the obligation, of further action before the CAFC. The parties shall provide such reasonable cooperation and assistance as is necessary to prosecute such further action and each party shall bear its respective expenses in connection therewith.

13. Any decision on appeal to the Agency BCA or Court of Federal Claims contemplated by Paragraph 10 hereof, and any resulting judgment of the CAFC in an action contemplated by Paragraph 12 hereof, if binding on PRIME, shall bind SUB, fully and completely and SUB shall have no right of action against PRIME relating to and/or arising out of the work SUB performed for PRIME.

14. SUB's claim shall be submitted on the issues of both entitlement and quantum. Both entitlement and quantum shall be joined and remain joined in one proceeding, unless the Agency BCA or the Court of Federal Claims or, if applicable, the CAFC shall direct otherwise.  If SUB prevails on entitlement by decision of the Agency BCA or the Court of Federal Claims, and the appeal is remanded to determine quantum, PRIME agrees to permit SUB to present the issue of quantum to the Agency in PRIME's name for resolution or final decision, and, if still not resolved, to permit SUB further to pursue such resolution in PRIME's name, in the  manner set forth in Paragraphs 7 through 13 above.

15. PRIME will remit to SUB the amounts, if any, as may finally be allowed PRIME on account of SUB's claim by the Agency BCA, the Court of Federal Claims, or the CAFC, less those amounts properly due PRIME, including appropriate indirect and other costs and profits of PRIME which are part of the Prime Contract claim submitted to the Agency.

    
    Reservations

16. SUB shall hold PRIME, its officers, directors, employees, shareholders, agents, and representatives harmless from any liability, damages, and judgment, including costs and expenses, resulting either from any Government claim asserted in any proceeding described  herein, to the extent that any such claim arises out of the performances  by SUB referred to herein, or from any act or omission by PRIME in connection with the preparation, submission, certification, negotiation and/or prosecution of its claim.

17. In connection with the cooperation and assistance to be provided by PRIME to SUB and by SUB to PRIME, as contemplated herein, such cooperation and assistance shall not include any requirement that PRIME furnish to SUB, or SUB furnish to PRIME information, whether by way of testimony, documents, or otherwise, which (a) would be considered privileged or not subject to discovery by SUB or PRIME under the Federal Rules of Civil Procedure or if SUB and PRIME were adverse parties in civil proceedings, or (b) would not be obtainable by the Government pursuant to the Rules of the Agency BCA or the Court of Federal Claims.

18. This Agreement and actions taken under this Agreement shall not constitute admissions of any kind whatsoever by any person, firm, or corporation to any other person, firm, or corporation. This Agreement and such actions shall be considered as taken solely for settlement, compromise and resolution of SUB's claim, and shall not be usable for any other purpose, including as evidence in any court proceeding, provided, however, that this Agreement may be used (a) in the appeal to the Agency BCA or Court of Federal Claims contemplated by Paragraph 10 or in the appeal to the CAFC of an adverse Agency BCA or Court of Federal Claims decision contemplated by Paragraph 12, solely for the purpose therein of establishing the jurisdiction of the Agency BCA or the Court of Federal Claims over SUB's claim, and (b) in any proceeding between the parties for the purpose of proving the existence or effect of this Agreement itself.

19. Nothing in this Agreement shall constitute or imply verification by PRIME of any fact or facts alleged by SUB in support of its own cause of action or verification by SUB of any fact or facts alleged by PRIME in support of its own cause of action.

20. PRIME shall have the right to approve or disapprove any statement or allegation contained in any pleadings, briefs, memoranda, correspondence, or other written materials prepared by SUB for submission to the Agency, Agency BCA or Court of Federal Claims, or CAFC in the course of the performance of this Agreement provided, however, that PRIME shall not unreasonably withhold approval.

21. Nothing in this Agreement, including without limitation, Paragraph 8, shall entitle SUB to pursue remedies outside those set forth in this Agreement.Except as set out above, SUB shall no right of further recourse or right of action whatsoever against PRIME in connection with the subject matter of its Subcontract and SUB does hereby forever remise, release, waive, and discharge PRIME from all liabilities, obligations, claims, and demands whatsoever, known or unknown, incurred or anticipated, under and/or arising out of circumstances relating to the above-described work by SUB pursuant to the Prime Contract. Any final decision on PRIME's  claim shall be binding upon both PRIME and SUB.

22. Subject to the terms of this Agreement, PRIME does hereby forever remise, release, and discharge SUB of and from all liabilities, obligations, claims, and demand whatsoever, known or unknown, incurred or anticipated, under and/or arising from the above-described work by SUB pursuant to the Prime Contract.

23. Each party shall have the right to choose its attorneys, consultants, experts or other counsel, advisers, or witnesses in the pursuance of its claim.
    
    General Provisions

24. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

25. This Agreement has been executed in the State of__________ and shall be governed and construed in accordance with the laws of that State, except that any issues relating to interpretation of the Prime Contract and the allowability of costs of SUB's claim thereunder shall be governed and construed in accordance with Federal contract law.

26. As used herein, the terms "Court of Federal Claims," "United States Court of Appeals for the Federal Circuit," and "CAFC" shall be deemed to include any such judicial body as may hereinafter succeed by operation of law to those powers and/or responsibilities of the Court of Federal Claims or United States Court of Appeals for the Federal Circuit, as constituted on the date of this Agreement.

27. This   Agreement consisting  of __________ pages, including this page, supersedes and replaces any prior understandings of the parties with respect to the subject matter hereof and is the entire agreement between them.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written.

CONTRACTOR CORPORATION

By __________ By  __________

Date __________ Date __________  

Joint Defense Agreement – Example Two.
[Note: This involves a joint defense of claims against a prime and its subcontractor]

JOINT DEFENSE AGREEMENT

RE:__________CLAIMS BY__________ AGAINST__________ AND _________

Whereas, __________has awarded __________ contracts to __________ and __________; and

Whereas,__________ has issued a decision asserting claims against  both__________and__________ under the clauses of the __________ contract; and

Whereas, the parties will likely file appeals regarding said claims with __________
or another appropriate forum:

Now, therefore, in consideration of the foregoing and for good and valuable consideration, the receipt and sufficiency of which is acknowledged by each party,    __________  and __________agree as follows:

1. Effective __________, the parties including their designated outside counsel desire to, and hereby do in fact, form a joint litigation effort to defend the claims asserted by __________.

2. The parties shall cooperate with each other in the defense of the claims referenced in ¶ 1 of this Agreement. This cooperation shall extend to all phases of the appeal (including investigation, pretrial discovery, settlement negotiations, if any, including alternative dispute resolution procedures and the trial and post-trial of the action), and may include the disclosure of documentary information and the active assistance of personnel having knowledge regarding the facts of the case. This cooperation shall extend only to this one dispute with __________and shall not extend to any other actions, contracts or procurements whatsoever.

3. From time to time, and in the process of prosecuting any of their claims, the parties may share confidential or privileged business, financial and legal information. In sharing such information, it is their common intent to benefit the joint litigation effort, and such sharing shall be strictly governed by the attorney-client and the attorney work-product privilege as they otherwise would apply. However, this Agreement shall not be construed to require either party to disclose any confidential privileged or attorney work-product information to the other.

4. The parties recognize that free and frank sharing of information between them will benefit both in defending the claims asserted by __________. The parties therefore agree that no information shared or provided by one party to the other under the terms of this Agreement shall be admissible in any proceeding as evidence against the party providing the information.

5. The covenants set forth herein form the entire agreement between the  parties regarding the__________ claims, and no prior statements or representations, whether oral or written, are or are intended to be part of this Agreement. This Agreement shall not be altered or amended except in a writing executed by the parties.

6. This Agreement shall be governed by the laws of __________.

7. Either party may terminate this Agreement upon thirty (30) days prior notice to the other. The termination of this Agreement shall not affect the protections and privileges accorded to communications made prior to the effective date of termination.

8. Each party shall bear its own costs of defending the __________ claims except as to those costs which the parties may agree in writing in advance to share.

9. The parties shall keep each other apprised regarding any settlement   negotiations   that   either   party   may  have  with     regarding the __________ claims.

   Signature Signature

   Printed Name Printed Name

   Date Date

Joint Defense Agreement – Example Three

Joint Proposal and Appeal Agreement

This agreement, effective as of the __________ day of __________, 2006, by   and  between __________ (“SUB  1”),__________  (“PRIME”), and __________ (“SUB 2”). 

WITNESSETH THAT:

WHEREAS, SUBS have performed work for PRIME under United States Prime Contract No.__________  (the "Prime Contract" or "Contract"); and

WHEREAS, SUBS agreed  to provide __________ services according to commercially available terms, upon request of SUBS, and in accordance with the Prime Contract.

WHEREAS, SUBS have performed numerous tasks assigned pursuant to and in accordance with the Prime Contract, have incurred costs, and have submitted numerous invoices to Prime for payment, totaling approximately $__________  (Prime) and $__________ (Sub 2); and

WHEREAS, Agency has now declined to pay the invoices presently pending before it, citing various internal flaws in its contracting process and/or funding process; and

WHEREAS, PRIME and SUBS recognize that, absent future consent in writing by Agency, SUBS may have no immediate right of appeal or immediate cause of action against Agency in relation to SUBS’ invoices; and

WHEREAS, PRIME and SUBS recognize that, pursuant to the Contract Disputes Act of 1978, PRIME may dispute, by written appeal to the Agency Head directed to the Agency Board of Contract Appeals ("Agency BCA") or, alternatively, to the United States Court of Federal Claims, any adverse determination by Agency in respect to PRIME's invoices; and

WHEREAS, SUBS have submitted to PRIME certain invoices for work performed, which the Agency has to date not paid; and

WHEREAS, PRIME and SUBS find it in their mutual best interest to cooperate in presenting SUBS’ payment claims as a mutually-agreed part of PRIME's payment claims;

NOW, THEREFORE, in consideration of the foregoing and of the mutual promises and covenants contained herein, it is agreed between the parties as follows:

Submission of SUBS’ Claims

1. SUBS will promptly submit to PRIME certified proposals ("claims") in standard form, according to the past practice of the parties. SUBS shall certify that all amounts contained in its claims are true and correct to the best of its knowledge, information, and belief.

2. If PRIME and SUBS agree upon SUBS' claims as submitted to PRIME, or as subsequently modified, PRIME will submit SUBS' claims to the Agency as part of PRIME’s payment claims.

3. Upon submission of the claims to PRIME, and during negotiation in relation to the claims by SUBS with PRIME, or by SUBS or PRIME with the Agency, PRIME and SUBS will fully, completely, and without reservation share all information and records so that an accurate and complete claim will be provided to Agency for its consideration. SUBS will allow PRIME and Agency to perform any accounting reviews or audits of books and records relating to performance of the work in order that PRIME may satisfy its responsibility for settling SUBS’ Subcontract work effort in accordance with the terms of the Contract. The disclosure of such information and records shall be for the sole purpose of preparing the parties' respective claims, and shall not be used by either party in any manner inconsistent with this purpose.

4. PRIME will submit the SUBS’ claims, as submitted by SUBS, or modified by agreement of the parties, to the Agency for final resolution, and will certify same under the Contracts Disputes Act of 1978 (the “Claims”).

5. To the extent that the Agency may agree to negotiate with regard to SUBS’ Claims, PRIME and SUBS shall carry on any and all negotiations necessary and appropriate in connection therewith. SUBS shall prepare for timely submission by PRIME any additional information and documentation which is requested by the Agency or PRIME in support of SUBS' Claims.

6. If the Agency will pay SUBS’ Claims directly, SUBS may submit invoices, claims, etc. directly to the Agency, and will deduct all payments made from amounts owed by PRIME.

7. PRIME and SUBS, with their respective representatives, and with each party to bear its proportionate expenses (as defined below), shall be responsible for all negotiations which may be required in connection with resolution of SUBS' claims in the course of the proceedings contemplated by Paragraphs 1 through 5 of this Agreement, and shall have present at all such negotiations their authorized representatives as Agency and/or PRIME may request.

8. SUBS shall have the right to accept or reject any settlement or resolution offered by Agency in connection with SUBS' Claims.

   8.a. Apportionment of Amounts Received.

   1. In the event that the Government determines specific amounts that are due or not due to Prime, Sub 1, or Sub 2, the parties will be paid in accordance with that apportionment. Prime will seek to have the Government make a specific determination of what is owed to each of the three parties in disagreement. By way of example, if the Government determines that Prime is entitled to 100% of its invoice amounts, and Sub 2 is entitled to 90%, and Sub 1 is entitled to 95%, payments under this agreement will be made in accordance with those percentages.

   2. If any party receives less than 100% of the amount it currently has due in invoices, it may elect to proceed further in the litigation process as provided for in this agreement while undertaking every effort to see that the parties who do not wish to continue are paid currently for the amounts the Government has determined they are owed.

   8.b.Outside Counsel.

   1. Legal fees are being expended by Prime, Sub 1, and/or Sub 2 to cause the collection of invoices at issue here. The parties agree that effective , 2006, and continuing until such time as the Claims are resolved, each may continue to retain outside counsel to enable collection of the full amount of the certified claim. While each party’s counsel shall continue to represent and report to their own client, the parties agree that outside counsel shall collaborate to bring about the parties’ mutual goal of receiving payment for the claims. To that end, the parties agree to pool their legal resources and share on a pro rata basis the resulting legal fees and expenses in this matter (the “total legal expenses”).

   2. From , 2006 forward, the total legal expenses each month will be apportioned in accordance with each party’s respective interest in the total certified claim: Specifically Prime shall be responsible for % of total legal expenses; Sub 2 shall be responsible for        %   of total legal expense; and Sub 1 shall be responsible for % of total legal expenses.

   3. To facilitate the implementation of this Section 8.b, the parties shall instruct their outside counsel to send monthly invoices for services rendered pursuant to this Agreement to counsel for Prime, not later than the 5th day of the month immediately following the close of the month in which the services are rendered. Outside counsel for Prime shall determine the total legal expense for the month, and shall  calculate each party’s proportionate share. Outside counsel for Prime shall  promptly generate invoices reflecting each party’s obligation, and send them to each party, together with copies of the underlying invoices. Within ten (10) days of receipt of an invoice, each party shall pay the invoice to the “ Trust Account” (the “ Trust Account”). Immediately upon receipt of sufficient available  funds,  Prime’s outside counsel shall pay each outside attorney’s open monthly invoice from the Trust Account. Outside counsel for Prime shall maintain records of all invoices received from counsel, invoices sent to parties, deposits received from parties and payments made from the Trust Account to counsel, and shall make such records available to the parties and/or their counsel upon request.

9. Consent of Judgment.

   1. Subject to the provisions of Sections 22 and 23 of this Agreement, Prime agrees that upon request by a SUB it will consent to judgment against it for up to the full amount of the SUBs respective certified Claims, plus authorized interest, less the party’s proportionate share of attorney’s fees then due to Prime, and less any sums paid to any SUB directly from the Government since the date of certification of the Claims. If a SUB seeks to secure its claim in this fashion, it shall pay its own attorneys fees, and shall not submit the fees as part of the total legal expense to be shared by the parties pursuant to Section 8 of this Agreement. So long as a party complies with this Section 9.a, Prime will  not contest the amounts of the Claims, but will promptly consent to judgment in the fully adjusted amount. As stated elsewhere in this agreement, the parties agree that the only interest due by and among them will be that owed by the Federal Government on the Certified Contract Disputes Act claim. In addition, the parties agree that so long as all parties are pursuing the Claims under this Agreement in good faith, neither Sub 2, nor Sub 1 shall seek to enforce the consent judgment.

   2. The parties expressly agree that any amounts due and owing to Prime or its attorneys to satisfy the obligations of Section 8.b above shall be deducted from the amount of any consent judgment prior to enforcement of any judgment.

10. Subcontracting of Work to Prime.

    The parties to this agreement recognize that Prime is a small organization. It has virtually no funds to continue its operations, or to pursue this litigation, except for those funds for which it seeks payment from  the  Government  as  part  of  the  Claims. Prime estimates that its monthly operating costs are in the range of $__________.  Sub 1 and Sub 2 agree to undertake to use their best efforts to place appropriate, valid subcontracts with Prime to the extent that they have such work available that Prime may appropriately perform, to aid Prime in meeting its monthly expenses.

11. If the negotiations referred to in paragraphs 5 and 6, above, do not take place expeditiously, or if they proceed in a manner indicating to SUBS and PRIME that a satisfactory and expeditious settlement is unlikely, or if any settlement or resolution offered by the Agency is unsatisfactory to SUBS, any other subcontractor, and/or PRIME, then upon agreement of the parties (including any other subcontractors), PRIME shall request a Contracting Officer's final decision in accordance with the "Disputes" clause of the Contract.

12. PRIME shall permit SUBS to take an appeal under the Disputes Clause of the Contract to the Agency BCA or Court of Federal Claims in PRIME's name from any decision of the Agency adverse to the interests of SUBS whether such decision results from SUBS' specific request as aforesaid or from the Agency’s own initiative. SUBS will have the same right to appeal any refusal to issue a final decision 60 days after submission of the claim to the Agency. PRIME shall notify SUBS promptly of any final  decision. The appeal by SUBS in PRIME's name under this Paragraph shall be in accordance with the Disputes Clause of the Prime Contract. PRIME will join in this appeal to present its related claims for payment.

13. Any negotiations with the Agency referred to in Paragraph 5, or any appeal referred to in Paragraph 12, shall be pursued by PRIME and SUBS with their own representatives and with each party to bear its proportionate share of expenses. The parties shall provide such reasonable cooperation and assistance as may be necessary and appropriate for pursuit of the actions referred to in Paragraphs 1 through 12 above.

14. From any decision resulting from any appeal to the Agency BCA or Court of Federal Claims contemplated by or referred to herein, SUBS shall have the right, but not the obligation, of further action in PRIME's name before the United States Court of Appeals for the Federal Circuit (CAFC). The same right, without obligation, shall accrue upon dismissal of the appeal by the Agency BCA or Court of Federal Claims  on jurisdictional or other grounds. In the event that SUBS elect not to exercise the right of further action contemplated by this Paragraph, PRIME shall have the right, but not the obligation, of further action before the CAFC. The parties shall provide such reasonable cooperation and assistance as is necessary to prosecute such further action and each party shall bear its proportionate share of expenses in connection therewith.

15. Any decision on appeal to the Agency BCA or Court of Federal Claims contemplated by Paragraph 12 hereof, and any resulting judgment of the CAFC in an action contemplated by Paragraph 14 hereof, if binding on PRIME, shall bind SUBS, fully and completely and SUBS shall have no right of action against PRIME relating to and/or arising out of the work SUBS performed for PRIME.

16. SUBS' Claims shall be submitted on the issues of both entitlement and quantum. Both entitlement and quantum shall be joined and remain joined in one proceeding, unless the Agency BCA or the Court of Federal Claims or, if applicable, the CAFC shall direct otherwise.  If SUBS prevail on entitlement by decision of the Agency BCA or the Court of Federal Claims, and the appeal is remanded to determine quantum, PRIME agrees to permit SUBS to present the issue of quantum to the Agency in PRIME's name for resolution or final decision, and, if still not resolved, to permit SUBS further to pursue such resolution in PRIME's name, in the manner set forth in Paragraphs 6 through 15 above.

17. PRIME will remit to SUBS the amounts, if any, as may finally be allowed PRIME on account of SUBS' Claims by the Agency BCA, the Court of Federal Claims, or the CAFC, less those amounts properly due PRIME, including appropriate indirect and other costs and profits of PRIME which are part of the Prime Contract Claim submitted to the Agency, and less reimbursement due to Prime under Section
    
    Reservations

18. In connection with the cooperation and assistance to be provided by PRIME to SUBS and by SUBS to PRIME, as contemplated herein, such cooperation and assistance shall not include any requirement that PRIME furnish to SUBS, or SUBS furnish to PRIME information, whether by way of testimony, documents, or otherwise, which (a) would be considered privileged or not subject to discovery by SUBS or PRIME under the Federal Rules of Civil Procedure or if SUBS and PRIME were adverse parties in civil proceedings, or (b) would not be obtainable by the Government pursuant to the Rules of the Agency BCA or the Court of Federal Claims.

19. This Agreement and actions taken under this Agreement shall not constitute admissions of any kind whatsoever by any person, firm, or corporation to any other person, firm, or corporation. This Agreement and such actions shall be considered as taken solely for settlement, compromise and resolution of SUBS' Claims, and shall not be usable for any other purpose, including as evidence in any court proceeding, provided, however, that this Agreement may be used (a) in the appeal to the Agency BCA or Court of Federal Claims contemplated by Paragraph 12 or in the appeal to the CAFC of an adverse Agency BCA or Court of Federal Claims decision contemplated by Paragraph 14, solely for the purpose therein of establishing the jurisdiction of the Agency BCA or the Court of Federal Claims over SUBS' claim, and (b) in any proceeding between the parties for the purpose of proving the existence or effect of this Agreement itself.

20. Nothing in this Agreement shall constitute or imply verification by PRIME of any fact or facts alleged by SUBS in support of their own cause of action or verification by SUBS of any fact or facts alleged by PRIME in support of its own cause of action.

21. PRIME shall have the right to approve or disapprove any statement or allegation contained in any pleadings, briefs, memoranda, correspondence, or other written materials prepared by SUBS for submission to the Agency, Agency BCA or Court of Federal Claims, or CAFC in the course of the performance of this Agreement provided, however, that PRIME shall not unreasonably withhold approval.

22. Nothing in this Agreement, including without limitation, Paragraph 7, shall entitle SUBS to pursue remedies outside those set forth in this Agreement.

23. Except as set out above, SUBS shall have no right of further recourse or right of action whatsoever against PRIME in connection with the subject matter of their Subcontracts and SUBS do hereby forever remise, release, waive, and discharge PRIME from all liabilities, obligations, claims, and demands whatsoever, known or unknown, incurred or anticipated, under and/or arising out of circumstances relating to the above-described work by SUBS pursuant to the Prime Contract. Any final decision on PRIME's claim shall be binding upon both PRIME and SUBS.

24. Subject to the terms of this Agreement, PRIME does hereby forever remise, release, and discharge SUBS of and from all liabilities, obligations, claims, and demand whatsoever, known or unknown, incurred or anticipated, under and/or arising from the above-described work by SUBS pursuant to the Prime Contract.

25. Each party shall have the right to choose its attorneys, consultants, experts or other counsel, advisers, or witnesses in the pursuance of its claim.

26. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

27. This Agreement has been executed in the State of __________ and shall be governed and construed in accordance with the laws of that State.

28. As used herein, the terms "United States Court of Federal Claims", "United States Court of Appeals for the Federal Circuit," and "CAFC" shall be deemed to include any such judicial body as may hereinafter succeed by operation of law to those powers and/or responsibilities of the United States Court of Federal Claims or United States Court of Appeals for the Federal Circuit, as constituted on the date of this Agreement.

29. SUBS are entitled to their proportional share of all interest recovered by PRIME on these claims as provided for by the Contract Disputes Act.

30. This Agreement consisting of __________ pages, including this page, supersedes and replaces any prior understandings of the parties with respect to the subject matter hereto and is the entire agreement between them.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written.

PRIME CONTRACTOR Subcontractor One Subcontractor Two

By __________ By __________ By __________

Date __________ Date  __________ Date   __________

Pre-negotiation Strategy and Planning

Careful thought needs to be given to dealing with subcontractors that have claims against the prime. Recognize that there are essentially two kinds of claims that a sub asserts against a prime. Those claims either originated from directions or problems with specifications etc. coming from the Government through the prime, or they resulted from the prime contractor's own actions against the subcontractor for its convenience.

The subcontractor will often not know which is which, and will try to negotiate exceptions out of the Joint Appeal Agreement for such issues if they are prime contractor only related. That is not an unreasonable position for the sub to take.

You must determine where you stand on these issues before you commence negotiations with the subcontractor. If you are the prime, you must understand who is responsible for the extra work that the sub performed, or have the ability to make a reasonable approximation of it. You cannot properly negotiate a Joint Proposal Agreement without this information, and you must have a Joint Proposal Agreement to protect yourself from later claims by the sub.

Short vs. Long Form Joint Appeal Agreements

Determining whether to use a short form or a long form Joint Appeal Agreement, as displayed in the materials above, is a personal choice and a negotiation choice. The long form is better in some respects - it spells out all of the issues that tend to come up during the processing of Government contract claims through the Contracting Officer level and into litigation.

However, many subcontractors will not accept such a lengthy document. Therefore, a short form agreement which states the essence - that the sub agrees to take what the Government gives it and will not separately sue the prime - may be the best that you can do. At least it solves the overriding issue.

Contract Types Approach

You should know that it makes a difference whether a cost type contract or a fixed-priced contract is involved. In a cost type contract claims generally do not occur so primes are generally not in the same situation as they are with fixed priced contracts. Extra work flows through to the Government in cost reimbursement requests and is paid.

The one exception for this situation involves cost reimbursement issues. As a result of this - the fact that FAR Part 31 causes a scrutiny of all of the prime contractor’s costs, including subcontractor's costs – a subcontractor’s costs can be disallowed. In those situations, the prime should probably process those disallowed claims directly before the Board.

If only the subcontractor's costs are at issue, then the subcontractor can be allowed to proceed with an appeal in the prime contractor's name, so long as that is done with strict limitations as outlined in the long form Joint Proposal Agreement.

It is not unusual in a cost type contract with the sub to actually include the basic language of the Joint Proposal Agreement in a clause that automatically lets the sub take care of its disallowance issues in the prime's name before the Board or the Court of Federal claims.

Audit Rights and Impasses

Subcontractors will routinely refuse to let prime contractors audit their extra work claims. The prime contractor can of course ask for a DCAA or other audit function to assist with an audit. Sometimes the agency audit function will do this, particularly if each of the claims is large.

Bear in mind that supporting the subcontractor’s claims before the CO and the Board is the prime contractor’s essential obligation and problem. Saying to the Government Contracting Officer that the sub will not let you audit is really begging the question. The prime has an obligation to take the necessary actions to see that the audit or something satisfactorily similar to it is done.

One way to take care of this problem is to have audit provisions that relate to the processing of claims, either in the basic contract or in the Joint Proposal Agreement, in which the sub agrees to provide audit information directly to the Government or to the Government’s representatives. Or, if the sub does not wish to provide information  directly to the Government, the parties can agree to have an outside accounting firm audit and provide that information in summary form to the Government so as not to disclose proprietary information.

There are ways to solve audit issues and impasses. The prime and the sub need to work on this -- the Government will often refuse to become involved and that in and of itself will create an impasse in the claims settlement process.

Impasses in Getting the Subcontractor “On Board” with the Joint Proposal Agreement

What happens when the subcontractor refuses to negotiate or sign a Joint Proposal Agreement? It simply says pay me or I am going to sue you: I do not have time to wait for the Government to pay.

There is little that can be done about the situation if the sub is really intent on suing. Anybody can file a lawsuit. One good thing, if there is something good about a lawsuit from a subcontractor, is that if the subcontractor recovers, it is likely that the Government will have to pay for this in full as part of the claims proceeding. It is an incurred cost.

Look at the termination convenience regulations at FAR § 49.108-5 in which litigation recoveries by subcontractors are paid in termination settings. The same result generally holds true if the Government is responsible for the events that gave rise to the litigation in non-termination settings.

Many times the subcontractor simply does not understand what the business benefits are for waiting. This is a prime contractor communication problem. The prime needs to explain these issues to the subcontractor, and make it understand the benefits.

Often it is as simple as telling the subcontractor that if it does not have its claim and the Joint Proposal Agreement signed by such and such a date, the claim package will be submitted to the Government without its portion included. That often jogs many subcontractors into constructive action.

But, what if you are concerned about the subcontractor's claim or approach? You are not sure whether the sub’s positions are correct. You have not had a chance to audit, and you do not know if the subcontractor's cost and pricing data for the claim is  accurate.  The Turner doctrine discussed below and mentioned earlier helps with this issue.

Turner Doctrine Approaches.

Problems arise when a subcontractor has a claim that the prime contractor does not have sufficient insight about to be fully comfortable with submitting. The prime contractor knows it needs to submit the claim. The sub has signed at least a short form Joint Proposal Agreement.

The decision by the Federal Circuit in United States v. Turner Construction, 827 F.2d 1554 (Fed. Cir. 1987) is of great assistance in this situation.

Turner in effect holds that the prime contractor can submit the sub's claim and a certified claim, while at the same time sending a separate letter to the Contracting Officer criticizing or pointing out problems with the subcontractor's claim. Prior to this time Contracting Officers demanded unconditional certifications of the subcontractor's claim by the prime. Note that in Turner the prime provided an unconditional certification, which it in effect qualified by its separate letter to the Government that simultaneously set out problems or issues it had with the subcontractor's claim.

Turner is not a good decision for the Government. It allows subcontractors and prime contractors to avoid dealing with many hard issues before claims are submitted. But, it is the law at the Federal Circuit, and therefore it applies to all Government contract situations.

Other Overriding Issues to Deal With

Litigation provokes inquiries from the public, and may also cause scrutiny by Government agencies and SEC regulators if the company is publicly held. Those issues are dealt with below:

Fraud, Waste, and Abuse Potential and Initiatives

All claims proceedings and litigation are in effect sole source contract actions. There is no competition. Therefore, as a minimum if the matter is over $650,000, cost and pricing data certificates will be requested at some point during proceedings. In any event, the information being provided in the certified claim is submitted under penalties of fraud, waste, and abuse initiatives.

The contractor needs to be sensitive to this situation, and recognize that the Government will impose additional scrutiny particularly on its cost information.  The need for correctness and accuracy is paramount.  And, if the contractor does not know whether information to be provided is precise or not, it needs to say so and disclaim it in the cost presentation.

Sarbanes-Oxley Oxley Disclosures.

Sarbanes Oxley disclosure issues are dealt with in the Contract Research & Analytic Institute’s Government Contract Compliance and Advanced Government Contract Compliance textbooks. We excerpt below pertinent information with respect to Sarbanes Oxley disclosures.

To summarize, if the contractor (publicly listed) is involved in litigation or sees claims developing, which can have a material impact upon its financial statements, it has an obligation to report that to the SEC. If it has large claims, and realizes in litigation that recovery on its claims will be substantially impaired, it probably has an obligation to report that to the SEC as well.

After the passage of the Sarbanes Oxley bill, chief executive officers and their chief financial officers are certifying quarterly that the information they provide to the SEC is correct, and that disclosure control procedures are in effect to get the SEC that information (the so-called 404 procedures). These two corporate officers are certifying these facts under penalties of a $5 million fine and 20 years in prison.

In light of the foregoing, airing on the side of conservatism in reporting and dealing with claims and litigation matters that could have a material impact upon financial statements is mandatory.

Overall Points for Consideration.

• Companies develop 404 procedures to detect non- compliance and/or related issues that could have a material effect upon their quarterly filings with the SEC, which must now be certified by CEOs and CFOs (on pain of up to a $5 million fine and a twenty year prison sentence if intentionally false).

• Companies are now legally obligated to construct these 404 procedures to detect such non-compliance, both prospectively and currently. Companies have been obligated to file financial statements that do not materially misstate their company’s positions since the passage of the SEC Act during the Depression. 404 procedures simply aid in fulfilling this long term legal obligation, which is required of companies filing statements with the SEC.

• Companies have concentrated on Finance Department and finance related issues in seeking to develop and institute their 404 procedures – that is because accountants understand the issues involved in this process and accounting firms provide support in getting this done.

• However, companies have most often not developed and not instituted similar 404 procedures to insure that operational problems within the company, that could have a material effect on the company’s financial statements, are disclosed.

• See the examples of operational problems discussed below, involving contract overruns and claims, which could have a financial impact on companies, and should therefore be disclosed.

• The problem is how to draft 404 procedures that pick-up these operational issues prospectively.

• Developing 404 procedures to address operational problems is difficult, and needs to be tailored to the individual company given its line of business and its individual operational practices. Performing a risk analysis when contracts are placed, and then updating the analysis throughout performance is a starting point that could be embodied in a 404 procedure.

• There are growing inquiries as to why the Government has not specifically addressed 404 procedures and the need for resulting disclosures as to operational issues on contracts. Government action on such issues will be forthcoming, perhaps in the form of a special contract clause in the next few years for larger programs at least.

Section 404 Procedures – Impact on Day to Day Government Contracts

A candid discussion with most compliance and financial personnel inside of companies will indicate that most procedures have been principally directed towards financial controls -- not disclosure obligations with respect to operational issues. Indeed, it is difficult to write control procedures for operational issues. Doing so is possible, but it requires some unconventional activity and creative thinking.

It is also clear from our discussions with prior students that procedures in place are principally focused upon financial controls. How would you undertake writing or creating controls to insure the disclosure of the type of information set out above?

It may be effective to provide examples, and overall guidance on the types of Government contracting matters that may require disclosure. That information could then be transmitted to the correct level, i.e. the Vice President of Operations or a similar position.

Perhaps, as some have suggested, a middle management committee could work closely with the Vice President of Operations to screen out items that do not require disclosure, and to work and investigate those that may require disclosure. This is all foreign territory in which the company will need to make its own way.

Financial v. Operational Issues – Reporting Requirements

Financial and operational issues have distinctly different reporting requirements. While Sarbanes Oxley drafters and regulators were likely focusing principally on financial issues, such as the “managing” or “smoothing” of revenues or expenses, operational issues require disclosure as well, as seen in the above referenced examples. Even though financial reporting controls might be more advanced, do not overlook the requirement to have operational disclosure controls in place and to implement them.

If operational matters are never being disclosed through the company’s current disclosure control procedures that may indicate an inadequate set of procedures. Why are disclosures not being produced? Is the company running perfectly?

As one attendee said "it is certainly painful to have the public and your customer see an SEC filing showing that something is creating a serious problem under an important contract". That is absolutely true, but as this person also recognized such a disclosure should occur at the same time that your customer is informed of it.

Do not let your customers find out about any such difficulties for the first time in an SEC filing. As a minimum, that is an unsettling surprise, and perhaps contrary to your contract obligations.

The Need to Know vs. the Requirement to Find Out

From a management point of view, a company needs to do what it has always needed to do when there are problems in the performance of work on various Government contracts; it must solve the problem. This is accomplished in different ways in different companies. In smaller companies there may be a strong emphasis in having lower level personnel inform supervisors at weekly or daily meetings of issues that they believe are or may become problems. Managers are then knowledgeable of what is taking place in the plant or operations.

In some larger companies, there have been complete risk assessment programs in place for many years on every contract that is over a certain amount. These companies then update ongoing risk assessments at set intervals with respect to a particular contract’s detailed performance obligations, i.e. what are current problem areas, which problem areas are increasing, what risk exists as to cost allowances, claims, overruns, etc? All of this is relatively informal, and will work if personnel and senior management are committed. If done thoroughly, it readily produces the operational control information required by Sarbanes Oxley.

Under Sarbanes Oxley there is a need to actively identify what is going on with the company so that management can seek and find information that must be properly disclosed. The company’s procedures and overall approach cannot be to sit back and wait for management’s ordinary, informal fact finding process to take place, either slowly or rapidly.

The company has immediate disclosure obligations to its public investors as to operations inside of the company, thereby requiring a set of procedures to insure that disclosures take place, as well as a commitment by personnel to implement such procedures. Even the ordinary risk assessment approach discussed above in place for large companies probably needs to be beefed up.

What is the SEC Looking for From Government Contractors?

The SEC’s interests are similar to those of other Government officials that are monitoring Government contractors’ general compliance measures. The SEC is interested in whether the contractor has focused on issues important to its particular company and its particular industry.

General issues that affect all companies are important, but those are easier to deal with. Anticipating the unique problems that affect the company itself or the company’s particular industry can be more difficult.

As long as the company has adequate, clear procedures in place that address particular company and industry issues, and those procedures result in periodic disclosures, the SEC will likely understand if the disclosure process turns out to be less than perfect.

In the risk area, Bob Dole and Tom Daschel, have made a useful proposal (similar to the SEC staff reports) to audit more thoroughly (repetitively) in high risk areas:

Congress and the SEC could also assess whether it would be practical to apply a risk-based approach to auditing processes, with the level of review being the most intense in problem areas, rather than being applied in rote fashion across the board. As examples, two to three levels of review may be justified for revenue recognition issues, but not for travel and expense reports. Congress and the SEC should consider whether audits could be more tailored to focus on areas of higher risk.[Wall Street Journal, October 3, 2005, p. A16.]

As addressed above, it is probably best for companies (and properly in the SEC staff’s view) to simply make documented risk vs. control decisions on their own as they know their risk areas.

Examples

Claims

When must a contractor disclose that it has large claims under a project or contract, which may or may not offset expected overruns?

As a general matter Government contractors have become much more conservative in classifying claims as revenue, or as potentially recoverable in whole or in part. Generally, if the claim is not the result of (i) a formal change order, and/or (ii) if data does not exist showing a specific past recovery rate from the Government, then such possible incoming funds are not treated as revenue until received.

Example: The contractor is building nuclear attack submarines for the Navy under long term construction contracts. It discovers that there are significant welding problems in certain areas of the ship’s hull.

An internal company team determines that because of the cost type nature of the contract, another specific contract provisions, the $300 million repair costs that must be expanded in one year should all be recoverable from the Federal Government. The company’s  total revenues from this business unit amount to $3 billion per year.

Must the company disclose this welding problem to the SEC in its normal filings, or in a special filing?

May the company wait to make its disclosure to the SEC until it actually prepares the claims, and has had the claims reviewed at senior levels?

May the company treat this as a normal manufacturing problem and not make an SEC disclosure?

Answer: Given the size of the  problem,  immediate  disclosure seems the prudent course. Years ago the problem would undoubtedly have been handled differently. The potential loss, if the Government were to disallow the cost or not allow recovery in any respect, appears to be 10% of the company’s revenue for the year and is therefore likely material.

Overruns

When must significant overruns that could occur on contracts be disclosed? What if overruns have not yet occurred, but day-to-day program personnel in the field strongly suspect that they will.

Example: A construction contractor is repairing levies in the New Orleans/Texas area. It has an initial $1 billion contract to repair a portion of the levies. Within two months of starting work on the job, its on-site program personnel and engineers report to the Vice President of Operations that it appears that virtually all of the levies that they are required to repair were not constructed correctly to begin with, and that the repair systems that were to be used will not work.

The contractor has no estimate for what it will cost to do this work.  Its basic contract is fixed-price incentive with a spread to ceiling of 115% and a 70/30 share line.

What must the contractor do? Does it have a reporting requirement to the SEC? Does it have a reporting requirement to the Government agency for which it is working?

Answer:  The Company can only report what it knows.   If it does not know anything specifically, a report cannot be made. However, setting aside the financial implications, the company does know that there is a most serious problem on this contract that could result in a material financial impact to its financial statements if the problem develops in a worst case manner.

Wouldn’t the prudent course be to include a simple statement to this effect in the company’s next SEC filing or a special filing?

Do not ignore the Federal Government contract law issue. Contractors have an obligation under federal law not to produce useless items for the Federal Government. Continuing to perform repair work, when there is serious concern about the stability of the system upon which the repairs are being performed, could be construed as a useless act.

Separate and apart from Sarbanes Oxley, the contractor may well have a disclosure obligation as a contract matter to its Federal Government customer that is purchasing the construction. In any event, good business judgment would seem to require the prompt engagement of the customer concerning this particular issue rather than letting the problem fester.

Press Relations

Dealing with the press is something that must be done. It is often best done by public relations and other press related officials who understand how to deal with individual situations, and know what to say as well as what not to say. A lawyer involved in the litigation is generally not the right spokesperson. But, lawyers do need to make a presentation to public relations people, generally some sort of white paper that press relations personnel can interpret in order to make presentations.

Customer Relations

Customer relations must also be considered. As a general matter, Government customers are not affected by pending claims or litigation. This is a way of life under Government contracts that does not surprise anyone.

That does not mean that you should not communicate with your Government customer. When litigation is about to start or is pending, you should provide the customer with an explanation in a personal briefing session and/or in a separate white paper.

When and How Should Litigation be used to Resolve a Claim?

The materials set forth in the foregoing section discuss the actions that a contractor needs to undertake in order to exhaust all possibilities of settlement at the Contracting Officer level, as well as related matters at the Agency. This section discusses the issues that are presented in deciding whether to enter into litigation, and how to use litigation as an actual settlement tool.

As so relatively few cases actually go to trial, contractors should remember that most cases are going to settle once litigation starts. The issue is how to maximize recovery, while minimizing the time and expense of doing so.

In an overall setting, the litigation portion of the resolution of claims is ignored by many contractors, not dealt with as being considered too antagonistic or hard an approach to utilize, or simply avoided because of the perception that counsel needed to deal with litigation issues is too expensive. All of those reasons for avoiding litigation are in part erroneous.

Litigation is simply a management tool to gain a settlement in any situation. In the Government contract arena litigation is one-half of the equation. How can that be? Because Congress has passed the Contract Disputes Act, which effectively requires that any issue that the parties can not resolve voluntarily can only be resolved in two ways -- either as a formal claim followed by a formal final decision of the contracting officer, or during the course of litigation on an appeal to either the Board of Contract Appeals or the Court of Federal Claims.

As mentioned above, as over 90% of the cases taken into litigation are settled before trial, using litigation as a tool to gain an appropriate settlement is necessary. There is no reason to be afraid of the litigation option. Indeed in many ways litigation with the federal Government is much more predictable, rational, and reasonable than in commercial litigation. Congress has seen to this with the CDA. Contractors also routinely recover interest in litigation - which is not true in commercial litigation. In addition, certain small contractors can recover  their attorney's fees - this does not generally occur in commercial litigation.

Litigation of Government contract disputes is something that needs to be approached knowledgeably and as a part of an overall management approach to appropriately maximize a contractor’s recovery on extra work or other items that have been required of the contractor during contract performance.  The claims process is one-half  of this – the appropriate use of the litigation process is the other half.

Initial Strategy Drivers and Decisions - There Are Many and They Are Subjective

Even before litigation is instituted, which is usually done by filing a Notice of Appeal under appropriate circumstances, it is necessary to consider two principal matters: (1) unique federal Government contract procedural issues, and strategy related to them, and (2) the costs associated with the litigation, and related issues. We discuss these in order below.

We then discuss actual litigation mechanics, and ideas for accomplishing those in a way that addresses the overall purpose of litigation in the federal Government contract area – getting paid for claims, etc. within the shortest possible time, and with the least possible cost.

Choice of Forum for Litigation (Procedural); Choice of Law (Substantive); and Choice of Opponent Issues (Judgmental)

The federal Government contract area is unique in terms of where litigation is pursued. That issue drives other related issues, such as whether the two forums available to contractors have differing favorable law to one party or the other, or whether various differing judgmental issues exist concerning the two forums’ personnel and procedures that may have an impact upon the outcome of a case.

We stress again that the materials that are contained in this section are highly judgmental -- different practitioners will have different views. Our point is to raise these issues so that you can make your own informed judgments.

Choice of Forum

The issues presented for decision as to choosing a forum in an effort to better one’s chances in litigation, virtually all come out of the Contract Disputes Act of 1978.

That Act provided that a federal Government contractor could go to either of two forums to resolve their Government contract disputes. Contractors could go to the agency Board of Contract Appeals 90 days after a final decision was issued by the Contracting Officer, or it could go to the U.S. Court of Federal Claims one year from the date the final decision was issued.

Safety Valve Action in the Court of Federal Claims

Obviously, if the contractor misses the 90 day period, he has the safety valve of going to the Court of Federal Claims for one year. It is not surprising that there are a large number of cases like this - no conscious decision is made to go to the Court of Federal Claims - the contractor has simply missed the 90-day window and has no choice.

The Background of the Two Separate Forums

Why did Congress give contractors two separate forums? There is no particularly good reason for this. Historically, before the Contract Disputes Act, contractors could initially go to the Court of Federal Claims if they believed their case involved a breach of contract as opposed to an administrative matter under the terms of the contract. That issue of course provoked all sorts of jurisdictional litigation and Motions to Dismiss - the Justice Department, which is in charge of litigation at the Court of Federal Claims, was always trying to send contractors back to the Boards.

In reaction, Congress gave contractors the unfettered right to pick which forum they wanted to go to - an administrative body, or a Federal Court. The idea was to be fair to contractors - let them choose the forum they are most comfortable with.

Related Lobbying Issues - Pure Washington Activity

There were of course other lobbying efforts going on at the time, which were geared towards resolving this matter in a way that would be perceived as favorable to contractors. One interesting story that circulates is that a prominent member of the Government contract bar, whose office was in downtown Washington very near the Court of Federal Claims, did not want to have to go to the Armed Services Board of Contract Appeals, which was in suburban Virginia and a subway ride away. Therefore, pressure was applied upon the appropriate committee in Congress to get contractors the unfettered choice to pick or choose which forum they wished to utilize.

Does One File Their Case at the Board of Contract Appeals or the Court of Federal Claims?

There are a number of related issues, which are set out immediately below, that require initial consideration, as well as other separate issues that may be case related, which are discussed later in this section. The initial types of considerations, leading to a decision to go to the Board or to the Court of Federal Claims, are set out below:

• Size of Cases
  
  As will be discussed in the costs of litigation section below, the size of a case obviously has an effect upon how much money is going to be spent in trying the case. Some practitioners will say that it is less expensive to try a case at an agency Board of Contract Appeals because of the informality involved than at the Court of Federal Claims. We are not sure that is a correct analysis.
  
  

• Accelerated Procedures.
  
  What we are sure of is that the Board of Contract Appeals has an accelerated  procedure  for  dealing  with  cases  of  $50,000  or  less  or $100,000 or less.  This procedure is worth using, and indeed, except in the rarest cases, is the only way to process Government contract claims in this price  range. It is possible with discipline to economically process a $25,000 claim at the Board of Contract Appeals

  
  But, what is perhaps more important is that the larger a case grows the more contentious it becomes. Board of Contract Appeals Judges, and the entire Board of Contract Appeals, is a creation of the agency involved in the dispute. The A-12 litigation, the most contentious litigation perhaps in the last 30 years, was filed in the U.S. Court of Federal Claims. The claims in dispute were over $2 billion. It would have been perhaps unrealistic to expect the Navy to process this dispute at its own agency Board of Contract Appeals.
  
  

• Internal Agency Calls
  
  Ex parte calls can also be a problem. This occurred in publicized cases at the GSBCA a number of years in the past in connection with the Capital Electric line of cases. It is always a temptation for agency people at senior levels to be insensitive and call the agency Board or Chairman.

  
  In the Court of Federal Claims such a call will likely result in the FBI visiting the person who placed the call to investigate a potential obstruction of justice.
  
  

• Temperature Level of Agency Personnel
  
  How upset are the agency personnel about the particular dispute? If an objective person can tell that the agency people are really highly outraged with what the contractor has been doing, even though the contractor thinks he is legally correct, going to the agency Board of Contract Appeals, where the agency still has full control over the settlement process, could be a mistake.
  
  

• Is the Case Ready for Immediate Settlement?
  
  If the case is one in which the agency is clearly wrong for a host of reasons at the Contracting Officer level, it may be ready for immediate settlement at the agency Trial Attorney’s Office. This is because once the Trial Attorney looks at the case and sees that it is a loser, he or she will most likely take immediate action to get the case resolved.
  
  This happens more frequently than one thinks. The contractor did not communicate well with the Contracting Officer, new attorneys for the contractor and CO come into the case, an appeal is filed, and an understandable rationale for recovery is presented to the contracting agency. One needs to make the decision whether this type of situation exists -- it points towards going to the Board of Contract Appeals to keep the agency in control.
  
  If the case goes to the Court of Federal Claims, the Justice Department initially has 60 days to answer and will perhaps ask for more. Justice Department counsel are unfamiliar with the case and do not work for the agency. Yet, the Justice Department makes all decisions concerning the settlement and resolution of the case. They will consult with agency counsel and personnel, but they make the final decision based upon their view of the overall impact on the federal Government procurement system.
  
  The Justice Department’s decision making process is very different at times than an agency’s. Justice also has its own agenda on various procurement policy/litigation related issues.
  
  

• Do You Want the Agency to Retain Control Over the Case?
  
  As indicated above, settlement is one reason to keep the agency in charge of the case - by keeping the case at the Board of Contract Appeals with a fair Trial Attorney in charge. There are other reasons not to have the agency in charge. For example, if the case is particularly contentious, and you need adequate discovery to prove your case,  many practitioners would say that the Court of Federal Claims will enforce discovery proceedings more quickly and perhaps more broadly against the agency.
  
  

• Have Fraud, Waste, and Abuse Issues Been Raised?
  
  The Court of Federal Claims has a forfeiture statute, which holds that an entire claim may be forfeited if the Government proves one element of fraud in the claim. 28 USC 2514; UMC Electronics v. United States 249 F.3d 1337 (Fed Cir 2001)
  
  Therefore, it might be wise to take such cases to the Board of Contract Appeals if any type of fraud issue has been raised. That does  not mean that the Board fails to deal with fraud, waste and abuse issues. It just does so differently.
  
  

• Substantive Law Issues
  
  There are certain substantive areas of law that automatically telegraph to the contractor that he should be taking his case to one forum or the other.

Defective Pricing - Cost or Pricing Data Cases

A defective pricing case is a good example. With perhaps one or two exceptions, the Court of Federal Claims and the Federal Circuit have not decided a defective pricing case in a contractor’s favor in over the last 20 years.

In the same time period, the Board of Contract Appeals, according to various estimates, has been deciding defective pricing cases in the contractor's favor in the rate of something like 60%.

Indeed, the Air Force felt so oppressed by the rate of decisions in the contractor's favor on Air Force defective pricing cases that it opened a public dialogue with the Board of Contract Appeals, in which it objected to the Board’s decision rate in favor of contractors. That accomplished little.

Other Substantive Areas of the Law

Are there other substantive areas where the law is more favorable to contractors in one forum than the other?

Perhaps there are, but not as clearly as in the defective pricing area.

Because of the DeVito line of cases, it has been assumed for many years that the Court of Federal Claims is more favorable to contractors’ appeals from default terminations. We are not sure that is correct, but it is an issue to be considered.

In interpretation of contract cases there is a general feeling that the Court of Federal Claims may stay closer to the established rules for construing contracts, and therefore be more favorable to contractors.  We are not sure this is correct either.

Looking for Your Specific Case, or Something Close, at Both the Board and Court.

Whatever the general rule, you should examine and review Board and Court of Federal Claims case law that involves the dispute at issue in your case to look for trends and similarities before a decision is made to file at either forum. One may be surprised to find a case directly on point and favorable at the Board, but lacking at the Court or vice versa. This specific type of forum selection/shopping is specifically permitted by the Contract Disputes Act, and contractors are remiss if they fail to take advantage of it.

The Trial Attorney's Office

Each of the military departments has its own Trial Attorney’s Office.  If you have a case going to the Armed Services Board of Contract Appeals, you will deal with these Trial Attorney’s offices.

In addition, other agencies have either trial attorneys or people who fill those functions, who try cases at the Board, and are experienced in Board rules and procedures and how cases proceed. This is both good and bad as discussed below.

Military Trial Attorneys’ Offices

The military Trial Attorneys’ Offices are generally populated by both civil servant employees, as well as military officers, who are on a military career path.

It is at times refreshing to see the can-do now approach of military personnel in the litigation area; it is at times frustrating when you are on the wrong end of that approach.

All Trial Attorney personnel tend to be approachable, and willing to talk about cases without particular restrictions. It is wise to meet with the Trial Attorney assigned to your case in the opening rounds to see if there are common points of agreement or to learn what the major points of disagreement are.

It is good to continue with these periodic meetings, as well as the exchange of informal e-mails, separate apart from the formal pleadings which must be filed at the Board.

In addition, many of the trial attorneys will engage in informal discovery practices. You can trust them to do a fair job of producing documents and witnesses without formal Board orders or proceedings.  This can certainly save time and expenses in smaller cases.

General Services Administration

GSA has trial attorneys available to assign to their cases and in some instances to other agencies’ cases. Under the Board consolidation taking place in October of 2006, the GSA Board will also have jurisdiction to handle the resolution of contract disputes for a number of smaller agencies. Exactly how agency counsel from the other agencies will interface with GSA counsel is to be determined.

The procedures to be followed as to the interface with GSA counsel are similar to those described above for military cases.

Other Agencies

Agencies off the beaten path may have their own ways of resolving cases. They may have a very strong general counsel's office that insists upon dealing with cases themselves proactively. They may be happy to delegate all disputes resolution processes to the ASBCA. Experienced personnel should inquire as to all of these issues before deciding where to pursue litigation.

The Justice Department

The Justice Department is in charge of cases, including making all decisions concerning settlement, at the Court of Federal Claims. While  the Justice Department may consult with agency counsel and try to accommodate agency views, it is not uncommon for Justice to overrule the agency or make a decision based upon its concerns as to Government wide litigation policy.

The good part about this is that Justice is as far from being concerned about the agency's sensitivities as could be possible in a Governmental system. Justice is going to make its own decisions after hearing the agency out. Justice Department lawyers do not like to lose cases - they will settle bad cases at a rational figure.

But the Justice Department can also become bound up in policy wide issues relating to litigation that seem extraordinarily insensitive to contractors’ interests or that take an extraordinary amount of time. The Justice Department's approach to taking every issue possible with respect to the certification of claims under the Contract Disputes Act, which effectively ended in 1992 when Congress passed the technical correction provisions to the Contract Disputes Act, is an example. Without  any regard to contractors’ interests or congressional purpose, Justice challenged every conceivable issue regarding certification inadequacies.

While the Court has discovery procedures which parallel in many respects the Federal rules, and should therefore allow full and open discovery, it is not uncommon to see Justice raising issues that it believes are peculiar to the Government as to why discovery does not need to be granted. These can be time consuming and frustrating battles for contractors and their attorneys. Dealing with state secrets issues, executive privilege, pre-decision privilege processes, etc. are all issues rarely seen in civil Federal litigation.

Declaratory Judgments

The general understanding is that declaratory judgments are not available in the federal Government contract area. This comes out of cases such as King v. United States. This general understanding was  largely correct as part of the Contract Disputes Act.

Contract Disputes Act Practice

However, a practice has developed under the Contract Disputes Act, which allows the Boards of Contract Appeals to make declarations of parties’ rights under a contract when no immediate monetary dispute exists. The following decisions are representative:

• Sarang-National Joint Venture, ASBCA No. 54992, 06-1 BCA P 33,232 (Board held that it has “certain discretion to issue a declaratory judgment decision in situations `involving a fundamental question of contract interpretation or a special need for early resolution of a legal issue.’")

• Appeal of Martin Marietta Corporation, ASBCA No. 38920, 90- 1 BCA P 22418 (Board held that it could resolve all contract claims “including demands for "interpretation of contract terms, or other relief" as it has jurisdiction to grant “declaratory relief”.

• Dr. Michael Grinberg, DOTCAB No. 1543, 87-3 BCA P 20102 (Board held that it has “jurisdiction over all disputes arising under the contract including non-monetary actions”.)

  Speed of Boards of Contract Appeals

  The problem is that the Boards do not move fast enough in most instances to give meaningful relief to contractors.

  United States Court of Federal Claims Rule

  The answer to this difficulty is somewhat surprisingly the United States Court of Federal Claims. Being a Federal Court, it has a declaratory judgment rule - Rule 57. And most importantly, the Court will utilize it in short order in appropriate cases.

Acting Proactively - Alliant Tech Systems Situation

In Alliant Techsystems, Inc. v. U.S., 178 F. 3d 1260 (Fed.Cir. 1999), the Court heard a complex declaratory judgment request with respect to invalid option exercise allegations, and issued its initial opinion in 43 days from the date the case was filed. Such a result would be virtually impossible at the Boards of Contract Appeals.

A declaratory judgment action is extraordinarily expensive in comparison to a standard contract action - you are seeking injunctive relief, which involves filing numerous papers and briefs with the Court in short order. This significantly increases litigation expenses. Therefore there  is a serious price to be paid for seeking declaratory relief.

However, as demonstrated upon a review of the Alliant Techsystems case, there are appropriate instances for seeking declaratory judgment, such as in that case. In Alliant, the contractor was being asked to expend significant money in the future, thereby increasing its losses on a Government contract. Alliant sought an expedited ruling that it was not obligated to perform the option portion of a contract because the Government had not validly invoked the option clause. The Court agreed with a part of that invalidity argument.

Stopping Work as an Alternative

A portion of the injunctive relief/declaratory judgment approach is driven by the fact that it is always extraordinarily risky to stop work under a federal Government contract. In Alliant Techsystems the contractor did stop work and it was criticized by the Court for doing so.

If declaratory judgment relief is available in the Court in 40 days or so, contractors in most cases will probably not want to assert that the Government has committed so significant a breach that it was entitled to stop work, without having its dispute resolved by the Court of Federal Claims. Contractors will run the risk of being found in breach of the contract themselves if they do stop work, which would thereby extinguish any other relief they may have otherwise been entitled to receive.

Looking for Ways to Use this Technique Constructively

Contractors should think proactively - do they see contract interpretation, options, or other disputes brewing with the Government that are going to cause them to lose significant amounts of money on their contracts. If so, they need to try to time their litigation efforts, and get to Court before significant funds are expended so that their disputes are truly being resolved prospectively. While it is impossible to control this situation completely, it is possible to analyze events and be proactive before you lose the possibility to cut future losses.

And remember the need for a CDA certified claim and the 60 day final decision period.

Maritime Cases (Effectively Brought Only in US District Court)

The Contract Disputes Act holds that Maritime cases are to  continue with their pre Contract Disputes Act jurisdiction as admiralty type actions to be brought in US District Court or at the ASBCA.

The difficulty is that the Contract Disputes Act governs the sale of all goods and services. Therefore, when the Government purchases for example propellers or other parts from say the Federal Supply Schedule or through a directed contract, the assumption would be that this is Contract Disputes Act covered. The Government is simply purchasing goods or services that happen to eventually be going to a ship or other Maritime use.

Do not be misled by this assumption. The United States Court of Federal Claims has issued decisions, which in effect cut off its ability to review such cases. These cases are probably in error, but they are present and need to be respected. It is a waste of time to go to the Court, only to be simply dismissed on jurisdictional grounds, even if the Court’s approach is incorrect.

The Contract Disputes Act, 41 U.S.C. § 603, § 607, and § 609, requires that if a maritime contract is involved, contractors must seek review of a Contracting Officer’s final decision in the appropriate United States District Court -- not in the Court of Federal Claims. See the discussion of such issues in the following: Bethlehem Steel Corporation v. Avondale Shipyards, Inc., 951 F.2d 92 (5th Cir. 1992); Southwest Marine, Inc., et.al. v. United States, 43 F.3d 420 (9th Cir. 1994); and Bonanni Ship Supply, Inc. v. United States, 959 F.2d 1558 (11th Cir. 1992). The ASBCA also will hear some of these cases.

It should also be noted that Federal Rule of Civil Procedure Rule 82 provides that the general venue sections for civil actions – 28 U.S.C. § 1391– 1392 do not apply to admiralty or maritime claims. Federal admiralty law allows the Federal Government to be sued where they may be found and served.

Summary Judgment Strategy

Every case that goes to either the Board of Contract Appeals or the Court of Federal Claims should be reviewed for summary judgment potential.

For example, we have seen a recent case in which the Government has not paid a contractor - not because it disputes the underlying work, but because it cannot adequately understand the contractor’s invoices or accounting reasons. We have gone back to the basic work tickets and created new summaries/invoices, which may be certified as claims, and will likely be moving for summary judgment.

This is exactly the kind of case in which summary judgment can easily be pursued. As long as there is no dispute as to the underlying work and only paperwork issues are involved, the paperwork can be corrected before moving for summary judgment.

Summary judgment also works in a partial fashion. If you know that you are legally correct on a particular issue, but you cannot possibly sort out quantum issues without a trial, you may move for partial summary judgment as to legal entitlement issues only. If you win on summary judgment, you have resolved one half of your case and you will be in a much better position to negotiate a settlement on just the quantum portion.

The list of items on which you can move for summary judgment goes on and on. There is no hard and fast rule as to how many separate summary judgment motions or issues can be raised on a partial basis, but it should be considered in each case. You can be sure that your opponents at the trial attorney's office or at the Justice Department are considering summary judgment motions as well, and will file them to try to eliminate portions of your client’s arguments.

Particularly at the Boards and Courts, where there are no jury trials, summary judgment motions are a way of life, and an integral part of litigation practice. Both sides are trying to get an immediate legal or quantum leg up on the other side, and that is appropriate. It also shortens the litigation, lessens the costs, and leads to more resolutions of cases.

Consider yet one more example:

The Government has been reimbursing a particular item under a contract for 10 years. In the 11th contract for the 11th year, the Government changes its policy and decides that it will not reimburse this particular cost. The cost is only one modest element of the overall work that the contractor is doing, part of which is being done for a fixed price, and part of which is being done on a time and material basis. But, the total cost amounts to $250,000.

The contract provision under which the Government has been reimbursing the particular item for the last 10 years is ambiguous, and it is difficult to tell whether the item is really reimbursable under that particular provision by just looking at the language.

What do you do with this situation?

There is a two-part analysis here - a substantive law of Government contracts issue and procedural issues. This is generally the circumstance that you are confronted with.

On the substantive case law side you would want to know about the Foster Sportswear doctrine (L.W. Foster Sportswear v. United States, 405 F.2d 1285 (Ct.Cl. 1969)). That case in effect holds, as do cases following it, that the Government cannot interpret a specification in one way repetitively (by repeatedly reimbursing the contractor for the disputed item over the last 10 years) and then change its position without informing the contractor of its new interpretation before the contractor has placed its bid, which was prepared based upon the parties’ practices over the prior 10 years. This is likely also the rule in commercial contract disputes. See UCC section 2-208.

On the procedural side, the contractor could file its Notice of Appeal, and Complaint, and move immediately for partial summary judgment on the Foster Sportswear entitlement issue, without conducting discovery. If the contractor receives a favorable ruling on that issue, or  the Government reads the case law and decides that the contractor is right, a settlement of the quantum issue will follow.

Looking for and Predicting Settlement Windows

There are settlement windows throughout every case. Some cases may have unique settlement windows. But, virtually all cases have predictable similar settlement windows as well. We set out below a list for discussion and analysis:

The parties have obviously exhausted settlement negotiations with the Contracting Officer per the recommendations in the opening section of this text. A negative final decision has been received.

The Contracting Officer expects to receive a Notice of Appeal -- if the contractor has his case in hand there is no reason he cannot file a Notice of Appeal, a Complaint, and an initial round of document production, interrogatories, and requests for admission.

This sort of approach lets the Government immediately see your case if well plead, and allows you to make the first low-key statement of "isn't this a case that we could resolve" to the Contracting Officer or the Trial or Justice Department attorney. Discussions have been opened, and there has not been any show of weakness.

If the Government attorney is on their toes, they will push back in their answer, and perhaps counterclaim, as well as file an initial motion for summary judgment and discovery package. This is an opportunity for them to ask "isn't this a case that could be resolved". Settlement opportunities and windows appear in these predictable times.

The list goes on:

• A settlement window exists when discovery is exchanged by both parties. When the other side needs to do work, that is a good time to ask whether "this case could be resolved".

• The Judge assigned to the case will have conference calls or status conferences - he will make points during those conferences that seem favorable to one side or the other side's position. A settlement window would exist thereafter.

• You will see materials being produced in discovery  both by your side and the other side. A 1-page document focusing on the significance of something taking place in discovery opens a settlement window.

• There is a settlement window after key depositions have been conducted.

• There is a settlement window when a trial schedule has been set.

• There is a settlement window when all discovery has been completed. Each side knows the extent of the other side's case in full, short of trial.

We will review settlement offer issues in class scenarios and approaches.

Simply recall that once you reduce your offer it is virtually impossible to go back. That reduced figure will become your permanent floor that you will be expected to negotiate down from.

Time for Decisions - Board versus Court

We reviewed in the opening section the 90 day and the one-year clock that exist with respect to making the decision as to whether to go to the Board or the Court. We have also reviewed the procedural and substantive reasons for making that election. The point of this section is to talk about additional strategy issues.

All of these decisions about Board versus Court ideally need to be made during the final decision, settlement negotiation process with the Contracting Officer. There is no reason to wait until the last minute. Indeed, it may actually deter the resolution and/or settlement of the case if you have not thought through and made your primary decisions on this particular issue.

Please also bear in mind that you cannot change your decision once it has been made. If you go to the Board of Contract Appeals, you may not withdraw your appeal and then go to the Court. If you go to the Court, you may not withdraw your Complaint and go to the Board. There are some statutory provisions that allow the Court to send cases back to the Board for trial in appropriate circumstances - other similar cases are pending at the Board, you have taken only one to the Court. Be aware of that situation as this is similar to splitting your cause of action in civil litigation, and you will be criticized for it.

At the same time, if you are disappointed at the Board and a new issue on the same contract comes along, that is different and in such circumstances you may wish to consider pulling toward the Court. Whether the Government moves to dismiss that case and remand to the Board is a matter of subjective judgment.

Substantive Choices for Litigation Bases

Government contract claims fall into specific patterns. While it is  not possible to definitively classify each one of the patterns, it is certainly possible to state the most recurring types of claims in which most litigation is pursued. Set out below is an outline of these pattern claims. There is a detailed 196 page discussion of these in the text "Preparing and Defending Government Contract Claims" by the Contract Research and Analytic Institute.

1. Interpretation disputes

2. Defective specifications

3. Impossibility of performance

4. Superior knowledge

5. Claims arising during the inspection & testing phase of work

6. Acceleration

7. Late or Withheld Payments

8. Breach of Contract

9. Government Claims

   1. Default Termination

   2. Convenience Terminations

   3. Deductive Changes

   4. Proprietary Data Related Claims

   5. Defective Pricing

   6. Fraud/Waste/Abuse

Real Litigation Cost Considerations

One of the most confusing areas in Government contract litigation is the cost of that litigation. Many law firms compound this problem by not having control over their costs, and/or by being unwilling to give firm estimates or fixed prices to their clients for doing certain work. Clients are also at fault for being unrealistic about the costs of litigation, and for not managing, and making decisions concerning their cases in a timely fashion, preferably before the litigation is even filed.

In this section we discuss the issues that clients and their counsel should resolve early in the litigation or before it is even filed. In addition,  we believe all of these issues warrant exploration even if the litigation is being conducted in-house by company counsel and his or her assistants. Larger defense contractors may have specific litigation departments, through which the company does its own Government contract litigation. That litigation still costs substantial amounts of money even though the company is not getting a bill from an outside lawyer/vendor each month. The same overall analysis and rules would apply.

One of the good things about Government contract litigation is that the litigation is fairly predictable. The stages of the litigation, its evolution, and therefore the amount that each stage will cost can be predicted with some certainty. Finally, the contractor has the ultimate control over the litigation - in most cases it can be withdrawn at any time the contractor chooses, contractors can limit or reduce the claims they are asserting, and within each individual claim or element of the case, they can decide to stick to their estimates about what they are willing to spend. Unfortunately, it requires hard decision-making, and at times unpleasant discussions to do this.

Design Case to Cost?

It is possible to design cost to work that is going to be done on a particular case. It is no different than designing a piece of equipment to the cost that is available to expend on the equipment.

For example, a contractor has $100,000 constructive change claim which the Contracting Officer has refused to pay by issuing a negative final decision. Many law firms would tell you that is too small an amount in dispute to effectively recover. That is incorrect.

One must simply decide that they are going to spend no more than say $15,000 to collect that $100,000. That can either be done through the negotiation of a contingent fee arrangement, or by determining that the fees to be expended will be no more than $15,000. The lawyers are then required to design the litigation to the cost that is available for the collection activity.

There are many ways to save costs in litigation and to design cases to specific costs that are available for expenditure, as will be discussed at various points in the following sections that deal with specific pretrial activities:

Only Do Document Production

One can decide to do only document production, and not depositions. Depositions cost staggering amounts of money if allowed to run on interminably. Production of documents cost little – the preparation of the request, and the time to look at the documents, and then copy and categorize them. Once both sides have their documents, perhaps limited requests for admissions and interrogatories can be posed.

Do No Discovery At All

All pretrial activity can be limited. The company takes the risk that it understands its case and is prepared to present it without the need of documents or records from the other side. It designs to cost the expense of preparing the Complaint, reviewing the answer, preparing for trial, and for actually spending a day at the trial.

Do Individual Budgets for Sections of the Case and do not Allow Them to be Exceeded

It is possible to do a combined approach where one pays $5,000 for a particular task, and $10,000 for a different task in the pretrial calendar, etc. When the budget is exceeded in that area, work stops, and no follow-up activity is conducted. This is a particularly useful approach in  the deposition area. One can predict how much depositions cost per day, and based upon that cost decide that they will take 10 days worth  of depositions, and no more.

Summary

All of the foregoing requires a strong stomach and the willingness to manage cases as you would manage any other particular project in the company. It can be done and litigation costs can be predicted as a result.

Costs to Other Side? Does the Government Respond to This Issue?

The short answer is that the Government often pays little attention to the costs of its litigation. Agencies hire staff attorneys in various areas, who are paid on salary. Those attorneys are paid whether litigation is ongoing or not. It is part of the agency's budget. Therefore, the agency is not generally motivated by the need to defend litigation.

There are of course exceptions. If the agency has to pay large amounts in expert witness fees for example, that is often a factor that may affect their desire to settle. If there are other internal tangible costs involved - the need to pull large numbers of program people who have other jobs into the litigation defense - that will also be noticed.

What motivates an agency to settle is often the desire to do the right thing, and not contest payments that are otherwise due to contractors. Many agency personnel operate on this basis of fair  payment to contractors, and you should therefore not lose sight of that in pursuing litigation.

Offers of Judgment, Formal vs. Informal

The Federal Rules of Civil Procedure provide for offers of judgment in Rule 68 - Offer of Judgment:

At any time more than 10 days before the trial begins, a party defending against a claim may serve upon the adverse party an offer to allow judgment to be taken against the defending party for the money or property or to the effect specified in  the offer, with costs then accrued. If within 10 days after the service of the offer the adverse party serves written notice that the offer is accepted, either party may then file the offer and notice of acceptance together with proof of service thereof and thereupon the clerk shall enter judgment. An offer not accepted shall be deemed withdrawn and evidence thereof is not admissible except in a proceeding to determine costs. If the judgment finally obtained by the offeree is not more favorable than the offer, the offeree must pay the costs incurred after the making of the offer. The fact that an offer is made but not accepted does not preclude a subsequent offer. When the liability of one party to another has been determined by verdict or order or judgment, but the amount or extent of the liability remains to be determined by further proceedings, the party adjudged liable may make an offer of judgment, which shall have the same effect as an offer made before trial if it is served within a reasonable time not less than 10 days prior to the commencement of hearings to determine the amount or extent of liability.

Under this rule one party can propose to have a judgment taken against it in a certain amount. This is in effect a settlement offer. If the other side refuses to accept the offer, and it does not recover more than the offer at trial, it must pay the other party’s costs.

There is no such rule at the Court of Federal Claims, or at the Board of Contract Appeals. However, informal offers of judgment can have an effect during pre-litigation. And, a contractor or the Government can agree to follow the Federal Rule even though it is not directly applicable. Following the rule can be done in a simple way, such as asking the Board or Court to impose sanctions if one of the parties later refuses to abide by their previous agreement to follow the rule.

Abridged Approaches to Case and Planning Exit Strategies

We have discussed above designing cost to particular segments of a case, in which decisions are made not to expend greater costs than those budgeted for particular areas of a case. We have also discussed summary judgment motion practice as a technique in several areas of the course.

What we want to discuss and raise briefly in this section is the need to make an overall abridgment of one's case up front so that things do not become completely out of control presentation-wise at trial.

For example, a contractor can have (as we have had in the past) a case in which there are $400,000 in numerous constructive change costs that need to be litigated, fourteen of which are $1,000 or less. In such circumstances, it may be better at times to eliminate the $14,000 of $1,000 claims in order to concentrate fully on the remainder of the larger dollar items.

That is not always the rule. The substance of the smaller claims may for example help to demonstrate why the larger claims should be paid, and the extent of the extra work items. In all cases, it is important to consider the effort of litigating all of your claims, which should be undertaken in a cost-effective fashion.

There will also be times when it becomes clear during litigation that a contractor’s claims, interpretation disputes, or other positions are actually much weaker than originally thought. The  Government’s attorney asserts defenses that the contractor had not anticipated, and the contractor can see that the Government's positions are well taken, or that they at least impose substantial risk that the case will be lost at trial. Unless counterclaims are pending, the contractor can call for the dismissal of the suit by simply withdrawing its claims in most cases.

Every case must be well planned, and every case needs an exit strategy. The exit strategy and its implementation should be flexible.

Government’s Approach as Plaintiff or Defendant

In almost all Government contract litigation the Government is the defendant. It is being asked to pay additional money for some item or some monetary connection associated thereto.

The Government is rarely the plaintiff that is aggressively asserting claims and having to prove its entitlement to those claims. Therefore, the Government is uncomfortable when it is put in the position of being a plaintiff, and it does not necessarily have the same skill sets to put forward as does the contractor. The contractor should be aware of this, and aggressively put the Government to its proof, as such an approach will often provoke settlements.

Company Resource Impact

One important part of litigation preplanning is to determine how many company witnesses will be required to support the litigation, and  the senior attorney. Cases that can be proved through documents, with the assistance of one person at trial to testify as to the documents, is very inexpensive from a company resource expenditure viewpoint.

However, a case in which numerous senior people are involved, who must be present at trial, must be prepared for trial, and who are expected to perhaps attend pretrial depositions, can be extraordinarily expensive to the company. This is not just a monetary issue, but also a dilution of the company's ongoing business function when senior executives are tied up with the litigation of past events.

Future Business Receipts

One of the issues that is raised frequently in preparing for litigation is the fear that the company will upset its Government customer, and it will not receive future business as a result.

This is a valid concern. We have seen situations in which the company's pursuit of litigation has hurt it at least indirectly in terms  of future business. The company has been mentioned in evaluation documents as asserting claims, pursuing litigation against the Government, etc. This is the company's right under the Contract Disputes Act, and it is completely inappropriate for the Government to be doing this at the contracting level. Nevertheless, the Government does this informally in evaluations using means that contractors may not detect, and challenge.

Having said this, we believe it is rare for the presence of claims or litigation over past contract actions to have future business impact. The Government is used to having claims presented. The Government is in some respects like an insurance agency. It understands that claims will be submitted. They are part of the contracts process and a way of life, and as long as a contractor pursues them in a professional fashion, including through litigation, there is no future business impact.

Equal Access to Justice Act

Ordinarily, absent a special statute, a litigant in civil litigation cannot recover its attorney fees. Such a statute exists in the Government  Contract area-- the Equal Access to Justice Act (“EAJA”). Its purpose is to prevent small businesses or individuals from being deterred in contesting unjustified Government actions. There are two EAJA statutes: 28 U.S.C. § 2412 covers suits in the Court of Federal Claims. A similar statute, 5 U.S.C. §504 covers adjudicatory proceedings before the Boards of Contract Appeals. Many agencies have issued regulations implementing the Act.

In a contract case, the statutes enable a contractor to recover legal fees and costs incurred in litigation against the Government after the final Contracting Officer decision is issued or is deemed denied. Levernier Construction v. United States, 947 F.2d 497 (Fed. Cir. 1991). In the bid protest context, it has been held to include actions at the agency bid protest level. PRI/RCI v. United States, 37 Fed. Cl. 785 (1997). The EAJA does not cover private litigation that was caused by the Government’s improper actions. Prowest Diversified, Inc. v. United States, 40 Fed. Cl. 879 (1998).

In order to recover statutory legal fees (limited to $125 per hour for normal contract and bid protest litigation) and costs, you must (a) meet the financial qualifications, (b) “prevail” in the litigation, and (c) be ready to disprove that the position of the Government in the litigation was “substantially justified,” and (d) file a timely application. Each of these requirements has been the subject of litigation. However, from a litigator’s perspective, the key is winning at the trial court level and preparing the documents beforehand that will be submitted in the application.

Qualifications

To apply for EAJA fees in a contract action, at the time of the civil action, an individual’s net worth must be less than $2 million and a business’s net worth must be less than $7 million and have less than 500 employees. You have to prove that you meet this standard. What is required is an integrated balance sheet reflecting a systematic analysis of the assets and liabilities. The greater detail and specificity, the better. In the Court of Federal Claims, this application and each document on which it is relying must be attested to under oath. Rule 81(e).

Financial Proof Issues

A self-serving “affidavit” is insufficient. Al Ghanim Combined Group Co. Gen. Trad. & Cont. W.L.L. v. United States, 67 Fed. Cl. 494 (2005); Lion Raisins, Inc. v. United States, 57 Fed. Cl. 505, 511 (2003) (tax return and three balance sheets, and summary declaration insufficient to establish company's net worth); Doe v. United States, 54 Fed. Cl. 337, 342 (2002) (affidavit and cash flow worksheet were inadequate).

To avoid additional litigation and delays, this information should be in your initial application. However, it can be supplemented if the initial submission is timely filed. Chapman Law Firm v. United States, 65 Fed. Cl. 422 (2005).

With respect to net worth, an entity’s affiliates probably will not be counted in determining the $7 million figure if the underlying litigation does not benefit the related firms. Lion Raisins, supra. Whether such  benefit is found is discretionary based on the facts. This is an unsettled area legally so a showing should be made to show that the benefits accrue directly to the plaintiff and that the benefit to the affiliates is attenuated.

Numbers of Employees Proof Issues

The 500-employee standard also is not necessarily straightforward. While it is unlikely that subcontractor employees would be counted, the trial court will look to the substance of the relationship with subcontractors and affiliated companies to make this determination. Al Ghanim, supra.

Prevailing Party

Orders Granting  Relief  Requested: Not a Catalyst Leading to Such Relief

The fact that your law suit was the “catalyst” that caused the Government to take corrective action is insufficient to recover EAJA fees. To be a prevailing party, you must obtain an enforceable judgment on the merits or a court-ordered consent decree that causes a “material alteration in the legal relationship of the parties” or its “equivalent.” Buckhannon Board & Care Home, Inc. v. West Virginia Department of Health & Human Resources, 532 U.S. 598 (2001).

In Universal Fidelity LP v. United States, 70 Fed. Cl. 310 (2006), although no order on the merits was issued, the court held that an “equivalent” order existed by the court’s issuance of an injunction, followed by statements in the injunction order which, in turn, were followed by the corrective action requested - cancellation of the solicitation. Likewise, a court’s remand ordering corrective action sought was found to be equivalent to a consent decree. Former Employees of Motorola Ceramic Products v. United States, 336 F.3d 1360 (Fed.Cir.2003).

In contrast, in Rice Services Ltd. v. United States, 405 F.3d 1017 (Fed. Cir. 2005), when facing a bid protest and after an injunction had been issued, the Navy took corrective action and re-evaluated proposals. The Navy then moved to dismiss calling the action moot. The trial court granted the motion but in its order dismissing the case, ordered the Navy to implement its voluntary corrective action.

The Federal Circuit denied an EAJA recovery stating that the protester was not the prevailing party. The fact that the court had  ordered the Navy to fulfill its voluntary corrective action in granting the Navy’s motion to dismiss did not convert a voluntary decision to take corrective action into one changing the parties’ legal relationships.

From these cases, it is apparent that the Government can avoid EAJA fees if it takes corrective action voluntarily and unilaterally in the face of the lawsuit. That means that if EAJA is a major factor, you must consider whether the agency’s voluntary corrective action is truly sufficient based on the relief requested. If not, one must pursue the litigation in the hope of obtaining a court order requiring corrective action in the form sought or enter a consent-type agreement with the agency.

Partially Prevailing Party

If you prevailed on the claims overall, you should be given a full EAJA recovery as the prevailing party. Hensley v. Eckerhart, 461 U.S. 424 (1983). However, if you only prevail on a part of your claim, all is not lost: your fee claim may be reduced pro-rata. Community Heating & Plumbing Co., Inc. v. Garrett, 2 F.3d 1143 (1993). Whether a reduction is made is a matter of judicial discretion. Here is where records also play a role, discussed in more detail below. As discussed below, if you do not adequately segregate your time records to show different issues in the claim, the trial court can estimate the percentage of the case on which you prevailed. CEMS, Inc. v. United States, 65 Fed. Cl. 473 (2005).

Substantial Justification

Not Every Prevailing Party is Entitled to an EAJA Recovery

After you have prevailed, you must ascertain whether this is the type of case in which a court could award EAJA fees and costs. As an overall rule, EAJA should only be considered when the Government was so wrong as some stage of the proceedings that it had no reason to litigate the case. In other words, if it was a close decision on the law or facts, it is a waste of time to file an EAJA action.

But be aware that your perceptions will greatly differ from those of the Government. Unless the Government has absolutely no excuse for continuing its defense, it will contend that its position was substantially justified. While the Government bears the burden of proving that its position was substantially justified, the fact that the Government action may have ultimately been found to be arbitrary and capricious, unreasonable or irrational, or not in accordance with law, does not necessarily mean that EAJA fees will be awarded.

The Government’s Substantial Justification Defenses

The typical arguments made by the Government in its defense are:

1. the case raised an issue of first impression;

2. the regulations were ambiguous and/or law at that time was unsettled;

3. there were factual issues that, if decided differently, would have changed the outcome;

4. while the Government was in error, as a whole, its position was substantially justified.

These Government arguments do not always succeed.

In L.G. Lefler v. United States, 801 F.2d 387 (Fed. Cir. 1985), the court upheld an EAJA recovery even thought the precise legal issue involving the Buy America Act and the Changes clause had not been previously litigated where statute was clear.

In Keeton Corrections, Inc. v. U.S., 62 Fed. Cl. 134 (2004), the Government argued that a regulation was unclear. However, in other litigation, the Government had taken the opposite positions and the court awarded EAJA fees.

In contrast, in CEMS, Inc. V. United States, 65 Fed. Cl. 473 (2005), although the Government successfully defended 11 of 19 claims, because the Contracting Officer had not reviewed the decisions of her subordinates and had no factual or legal defenses at all to 6 of the successful claims, the court held that the Government’s overall position was not substantially justified. But see Manno v. United States, 48 Fed. Cl. 587 (2001) (even where Government’s actions in settlement negotiations was rigid and misleading, overall position was substantially justified.)

Nevertheless, a Government contract litigator should seriously consider whether to file an EAJA claim if such an argument can be made. This is particularly necessary since the costs of litigating an EAJA claim are sometimes significant, as discussed in part E below.

Strategic Considerations

Although each case is fact-specific, and the standards are identical, many practitioners perceive that the Boards of Contract Appeals are more likely to find the Government’s position was not substantially justified under 28 U.S.C. §504 than the Court of Federal Claims under 28 U.S.C. § 2412.

Winning at the trial level is extremely important. It is rare for a trial court’s determination on substantial justification to be reversed. Massie v. United States, 226 F.3d 1318 (Fed. Cir. 2001) is one of those rare instances. In that case, the court erred in allowing the Government to avoid a settlement agreement it entered that was outside the court’s jurisdiction and the Government was not substantially justified in seeking this relief in spite of the court’s support.

In contrast, in RAMCOR Services Group v. United States, 185 F.3d 1286 (Fed. Cir. trial court’s ruling that the Government had raised “substantial questions” of whether its actions were permissible was sufficient factual basis to avoid EAJA liability).

Fee and Cost Recovery Details

Legal Fee Caps

Legal fees are recoverable at $125 per hour in most contract matters. The fees include the preparation of the EAJA application. Baldi Brothers, Inc. v. United States, 52 Fed. Cl. 78 (2002). There can be cost of living increases. Chapman Law Firm, supra.

In order to recover attorney fees, the applicant must have “incurred” these fees. However, an agreement which makes your client responsible for fees based on the contingency of winning the case or recovery above a certain amount results in “incurred fees.” Ed A. Wilson v. GSA, 126 F.3d 1406 (Fed. Cir. 1997); Phillips v. GSA, 924 F.2d 1577 (Fed.Cir.1991). The fact that insurance may cover the fees is irrelevant.

Billing Issues

The next consideration is how you bill your time and expenses. This is the area where advance planning will pay huge dividends. Some cases state that sufficient documentation requires “contemporaneous records of exact time spent on the case, by whom, their status and usual billing rates, as well as a breakdown of expenses such as the amounts spent copying documents, telephone bills, mail costs and other expenditures related to the case.” Community Heating & Plumbing Co., Inc. v. Garrett, 2 F.3d 1143 (1993). You can expect the Department of Justice or agency lawyer who is smarting from having lost the case to argue that your bills are not exact enough.

Questions have arisen in litigation as to the increments of time used in your billing, i.e. 1/10 of an hour, every quarter hour, etc. However, if the attorney fee billing which contains this information is considered “typical,” the court should find it sufficient. Beta Systems Inc. v. United States, 866 F.2d 1404 (Fed. Cir. 1989). Fee statements have been found typical if they include “the dates on which work was performed, the attorney who performed the work, and the nature of the work performed.” Ramcor Services Group, Inc. v. United States, 41 Fed. Cl. 264 (1998). In contrast, average hourly rates over a period of time will be rejected regardless of how they are rationalized. Naporano Iron & Metal Co., Inc. v. United States, 825 F.2d 403 (Fed. Cir. 1987) (court rejects argument that an average of 3 hours per week over an extended period entitled contractor to recovery in spite of a lack of specificity of the work performed).

Many disputes involve the description of the “nature” of the work being performed and the justification for the hours billed. The  Government usually will allege that the nature of the work should be more detailed and that the time actually spent was far more than the Government attorney would have taken to perform the work. While you can rely on the “typical billing” case law to justify a boilerplate time description (i.e. “performed research”, “reviewed documents”, “analyzed pleadings”, “phone calls” a few extra words or sentences in your contemporaneous time description identifying the specifics of the “follow-up”  research,  the  call  to Mr.    re:    or the exact subject of the “review” will facilitate recovery and lower the cost of the EAJA claim litigation.

Recognize though, that the extra specificity in your time description has to present a reasonable description of the work and the justification for spending that time. The Government will be quick to highlight any efforts into an argument which was not accepted or to claim research or analysis could have been performed faster and sometimes, the Government prevails. Courts will make deductions for mistakes! Lion Raisins, supra; Baldi Bros.; supra. It is very important  to  carefully review your contemporaneous fee descriptions.

Fees versus Cost

There is a distinction between recovery of fees and costs. If you are a prevailing party but the Government’s position was substantially justified, you can still recover costs. These costs include “reasonable expenses of expert witnesses, the reasonable cost of any study, analysis, engineering report, test, or project which is found by the court to be necessary for the preparation of the party's case.” The costs at issue include costs for attorneys, paralegals and experts.

Once again, though, these costs must be adequately supported and their recovery is a matter of the trial court’s discretion. Neal & Co. v. United States, 121 F.3d 683, 684 (Fed.Cir.1997).

Paralegal time has been the subject of litigation. These costs are only allowed to the extent that the paralegal is performing attorney work at customary paralegal rates.

Expert fees are recoverable to the extent they are reasonable and necessary. Their fees are only limited by what is customary. If the expert can perform work that an attorney could also perform, for EAJA recovery purposes, it may make financial sense in a proper case for your client to assign factual background work primarily to the expert.

Contractor Assistance

Contractor employee costs in working on the litigation are not recoverable, even if they are reducing recoverable legal expenses by directly assisting an attorney. Baldi, supra. Assuming that you will prevail and that the Government’s position is not substantially justified, it may make sense to assign factual work that could be performed either by client personnel or a paralegal, lawyer or expert to one whose costs will be compensated at market rates.

Reductions Based on Contractor “Fault”

One statutory limitation can factor into your recovery—did much of the legal expense resulted from overly protracted proceedings caused by the contractor? If the court or board finds that you were responsible for the high cost, it can reduce the award even if otherwise justified. 28 U.S.C. §2412(d)(1)(C); Marshall Associated Contractors and Columbia Excavating (JV), IBCA No. 2088F, 2005 WL 1231813.

One statutory limitation can factor into your recovery—did much of the legal expense resulted from overly protracted proceedings caused by the contractor? If the court or board finds that you were responsible for the high cost, it can reduce the award even if otherwise justified. 28 U.S.C. §2412(d)(1)(C); Marshall Associated Contractors and Columbia Excavating (JV), IBCA No. 2088F, 2005 WL 1231813.

Time for Filing

The EAJA requires that applications to be submitted to the court “within thirty days of final judgment in the action.” 28 U.S.C. §2412(d)(1)(B). The Act defines “final judgment” as “a judgment that is final and not appealable.” Id. § 2412(d)(2).

“You can expect the Department of Justice or agency lawyer who is smarting from having lost the case to argue that your bills are not exact enough.”

In making this calculation, attention must be paid to the court’s or Board’s rules. For example, in the Court of Federal Claims, Rule 6(a), the 30-day period is measured from the “day of the act ··· from which the designated period of time begins to run.” This has been interpreted to be the last day that the Government can appeal. SAI Industries, Corp. v. United States, 421 F.3d 1344 (Fed. Cir. 2005). In that case, the contractor argued that the Supreme Court's statement in Melkonyan v. Sullivan, 501 U.S. 89, 96 (1991), that “[t]he 30-day EAJA clock begins to run after the time to appeal [a court's] ‘final judgment’ has expired” extended the time to the next day.

But why would you allow yourself to be in this position? If there is a question, file your EAJA application one day earlier.

The Strategy of Initial Filings

Perhaps the best way to open a litigation settlement window early in the case is by being knowledgeable and complete in the pleadings that are initially submitted to the Board or to the Court.

If the contractor understands its case and has done adequate pretrial preparation, it is possible to show the Government most of the contractor's case so the Government can make a decision on settlement early on.

Filing Complaint and Discovery Together

There is no reason that the contractor cannot file its notice of appeal, complaint, interrogatories, request for admissions, and document production request all at the same time at both the Board or at the Court of Federal Claims.

The Government may be able to avoid having to answer the discovery until 30 to 45 days after its Answer is due, but the contractor has put all of the initial litigation materials relating to the case in front of the Government, and turned itself into the decision-maker from a subtle point of view.

In addition, submitting the initial round of discovery with the complaint and the answer has the advantage of focusing the parties on their case. Proceeding in this manner forces the parties to do everything at one time from the claims perspective, which has benefit in getting both of the parties moving, as well as the added benefit of the parties’ being certain that they understand their cases fully and that they have all issues under control.

Examples

Several Complaint examples are set forth below:

Complaint Example One – Improper Government Demand for Payment and Threatened Set-Off Action Against Other Contracts

BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of ____________ *

Under Contract  __________

ASBCA No. ____________ * * * * * *

COMPLAINT

For its Complaint in this Appeal, Appellant alleges as follows: 

1. Appellant is a ______corporation with its principal place of business at ____________
   
   Statement of Facts
   
   

2. This is an appeal from the Defense Finance and Accounting Service’s (and its credit recovery company____________) demand that Appellant  pay  the Government $____________. (See the attached billing list from DFAS at Exhibit 1)

3. There has been no Contracting Officer’s final decision claiming entitlement to the repayment of any of these funds as required by the Contract Disputes Act. The Government has not specified any basis for this claim. Nor has the Government described the basis for its calculation.

4. The Government is now threatening to set off this full $ ____________ amount  against  currently  due  payments on other ____________ contracts. This would cause a critical cash flow situation at Appellant’s plant and prevent its performance on other contracts.

5. Appellant  believes  that  the  majority  of  this amount ($ ____________) relates to the termination for convenience of Contract # ____________.

6. Under the terminated contract, Appellant had agreed to purchase material from the Government for use in performing the contract.

7. Upon the termination for convenience of the contract, Appellant requested that the Government take possession of the property as part of its termination inventory, which was unused and intact, in return for a credit to the contractor.

8. The Government improperly refused to take possession of these materials that it had previously sold to the contractor. As discussed below, this is a violation of the termination for convenience clause

9. As to the remainder of the claimed amount, one of the bills shown in Exhibit 1 (#____________ ) in the amount of $ ____________does not appear in Appellant’s records, nor does it appear in any of the Government’s invoices that Appellant possesses. It appears that this is a mistaken assessment that does not relate to appellant.

10. As to the remaining $ ____________, the Government has not provided any specifics as to this amount in dispute or the reason giving rise to this attempted assessment.
    
    Legal Issues

11. As stated above this entire claimed amount of $ ____________ has not been the subject of a Contracting Officer’s final decision. The Government has an obligation to issue such a decision before it demands entitlement to claim amounts. 41 U.S.C.A. § 605 - Decision by Contracting Officer.
    
    If the Government does not issue a final decision, but does demand payment of a sum certain with no option to negotiate such amounts due, the contractor may pursue its appeal. Midwest Properties, LLC v. GSA, GSBCA No. 15,822, 03-2 BCA 32,344.

12. As to the majority of the claim by the Government ($____________), the termination for convenience regulations at FAR 52.249-2(d) hold as follows with respect to inventory:
    
    (d) After expiration of the plant clearance period as defined in Subpart 45.6 of the Federal Acquisition Regulation, the Contractor may submit to the Contracting Officer a list, certified as to quantity and quality, of termination inventory not previously disposed of, excluding items authorized for disposition by the Contracting Officer. The Contractor may request the Government to remove those items or enter into an agreement for their storage. Within 15 days, the Government will accept title to those items and remove them or enter into a storage agreement. The Contracting Officer may verify the list upon removal of the items, or if stored, within 45 days from submission of the list, and shall correct the list, as necessary, before final settlement.
    
    Wherefore, Appellant respectfully requests that the Board hear this Appeal, and determine that the Government is entitled to none of the money it seeks, or in the alternative that the Government issue a final decision and state its bases for entitlement so that Appellant may respond to them in detail.

    Respectfully submitted,

Complaint Example 2 – Claim for Recovery of Rejected Invoices

BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of ____________  

Under Contract  ____________

ASBCA NO. ____________

* * * * *

COMPLAINT

For its Complaint in this Appeal, Appellant alleges as follows:

Jurisdiction

1. The Appellant,____________, is a corporation incorporated in the State of ____________.  Its principal place of business is ____________.

2. This is an appeal under the Contract Disputes Act of the Contracting Officer’s final  decision of____________, denying Appellant’s certified  claim  dated ____________, requesting payments due in the amount of $ __.
   
   Introduction
   
   

3. This  contract  by  the  Government  is  for____________. The Government   pays   a   fixed price  for ____________, and provides cost reimbursement (without profit) for many of the expenses incurred in ____________.

4. The contract, which is the subject of this appeal, was awarded to____________ on ____________. This contract was preceded by numerous  other  similar contracts between ____________ and its affiliated corporations.

5. It was the Government’s standard and long term practice to always reimburse Appellant for various costs, including____________ costs.  These prior reimbursed costs include ____________.

6. The same basic contract form used by the Government in the contract was used in prior the Government contracts, in which ____________ costs were reimbursed. There were minor variations.

7. Appellant submitted invoices numbered ____________ and ____________ for ____________ costs. The Payment Office, with the Contracting Officer's concurrence, rejected the payment of these invoices. There was no reason given for the failure to pay.

8. The Contracting Officer’s final decision provides no analysis or detailed basis for this wrongful refusal to make payments due under the contract. This refusal is contrary to the parties past, repetitive, reimbursement practices in prior contracts.
   
   Factual Background
   
   

9. Under the ____________ contracts between the Government and Appellant’s affiliated companies, the Government either reimbursed the  affiliated  company  for  the cost of ____________, or the Government, through its own contractors and facilities, actually took the ____________.

10. The Appellant’s contract, at paragraph ____________, specifies that ____________ will be at the Government's expense. For the ____________ contract, ____________ costs have been reimbursed by the Government, as with other ____________ charges.

11. The Contracting Officer implies in her final decision that Appellant should not confuse practices in Respondent’s ____________with Respondent’s ____________ . Under the applicable case law discussed below, this is irrelevant.   In any event, ____________has been reimbursed for ____________. The Contracting  Officer’s  final  decision  is  factually  in error.
    
    Legal Issues
    
    

12. The Government may not repeatedly treat an item as reimbursable under prior contracts, and then later, while using the same contract type, abruptly change its course and deny such reimbursement. Appellant knew of the reimbursement practice previously used by the Government, and based its bid in ____________ on such reimbursement.

13. If the Government wished to change its past practices, and deny the payment of ____________ costs, it could do so only if it informed all bidders of such changes before the next contract was awarded. Such a notification would allow contractors to account for all necessary increased expenses in their bids.

14. There is a line of cases commencing with L.W. Foster Sportswear v. United States, 405 F.2d 1285 (Ct.Cl. 1969), in which the Courts and Boards recognize that the parties past performance sets a floor or baseline for their future performance obligations even when such contract provisions are ambiguous, or actually defective as in the case of Foster Sportswear.

15. The Foster Sportswear doctrine also requires disclosure that past performance practices are being changed before a new bid is accepted or submitted:
    
    Plaintiff admittedly knew that it could not produce an acceptable flying jacket under the contract specifications, as written, at the time that it submitted its bid. But it had had  five or six   previous contracts with the Navy for the same  type of jacket, with the same or very similar specifications, and in every case deviations were made and allowed as a matter of course--and had to be made for production to go on. Both the plaintiff and the Navy were aware of this past history, and necessarily relied upon it in entering into new contracts of the same type. We have no doubt that plaintiff would have a sound claim if the Navy had abruptly changed its practices under the same contract specifications. We likewise have no doubt that plaintiff would not have to indicate at the time it bid on the successor Navy contracts that it expected to obtain the same deviations.

16. In federal contracts the parties’ interpretations and performance expectations, based upon similar contracts in the past, form the basis for what is required under future contracts between the parties, even if there is no recitation of those specifics in the contract document itself.

17. The Contracting Officer has also stated orally that because the Government does not pay for ____________, the Government will not pay for____________. That position is irrelevant to the  issue  of  the  long established practice of the Government’s paying for ____________. The Government cannot change its reimbursement practices in the middle of contract performance.
    
    Relief
    
    

18. Appellant is entitled to reimbursement for its ____________costs as presented in its submitted invoices. ____________ invoices submitted to the Government in the future should also be paid under the terms of the contract, and in keeping with the parties long standing past practice of reimbursing such expenses.

19. The Government’s failure to pay has been asserted as a  claim under the Contract Disputes Act of 1978, 41 U.S.C. 601, et.seq. Appellant’s claim is in the amount of $ ____________.

20. Appellant is entitled to interest on the amounts withheld commencing from this date until the date of payment, pursuant to the Contract Disputes Act (41 U.S.C. 601, et.seq.).
    
    * * *
    
    WHEREFORE, Appellant asserts that it is entitled to payment of the amounts  withheld  from  its  invoices of $ ____________, plus interest at the Contract Disputes Act rate from the date of the certification of its claim, and all other relief to which it is justly and properly entitled.
    
    Respectfully submitted,

Complaint Example 3 - Improper Payment Withholdings Based upon Lack of Military Readiness Allegations

BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of ____________

Under Contract ___________

ASBCA NO. ____________
* * * * * *

COMPLAINT

For its Complaint in this Appeal, Appellant alleges as follows: NO DAMAGE EXPERIENCED BY GOVERNMENT

1. This is a timely appeal from the failure of the Contracting Officer to issue a final decision following the filing of a certified claim for payment to the contractor of monies withheld from invoices submitted to the Government. This claim, filed pursuant to the Contract Disputes Act, was  dated ____________,  and  delivered  to  the  Contracting  Officer  on ____________. The  claim  was  in  the  amount  of  $____________ when certified,  and  has  increased  thereafter  to  $____________ as a result of additional withholdings. 

2. The Appellant, ____________, is a corporation incorporated in the  State  of ____________. It has its principal place of business at ____________.

3. The contract, under which Appellant alleges the Government has failed to make payments, was placed by the United States acting by and through ____________.

4. After this contract was awarded, there followed a protest proceeding instituted by a third party at the General Accounting Office. The award to Appellant was sustained by the withdrawal, after a hearing, of the protest.

5. This contract is for commercial services. The Appellant provides a ____________to  the  Government for ____________months with two options for        months each; the Government pays a fixed price based on a fixed daily rate, and reimburses certain variable operating expenses.

6. Appellant believes the Government has deducted approximately ____________% from the amount of daily payments from the date of ____________ through ____________.

7. The Contracting Officer has never provided any written rationale for the deductions taken. Based upon oral  discussions, Appellant believes that it is the Government's  assertion that ____________ was not “capable” of performing 100% of the ____________ requirements called for by the original contract documents.

8. The Government's assertion, with no written justification, calculation, or stated basis, is that it may deduct this asserted ____________ % “lack of capability” from each invoice under a special, non-FAR clause in the contract.

9. The Government's deductions are impermissible. The Government has experienced absolutely no damages by any temporary, short-term limitation that may have existed on the contractor’s ability to ____________ during the period as specified in Paragraph Number 6.

10. ___________ has fully performed by ____________. The Government has not provided any evidence of actual damages in response to Appellant’s requests to do so. None exist.

11. On information and belief, the Government will admit that it never requested appellant to perform services that could not be carried out.

12. Respondent’s counsel has stated to Appellant’s counsel that there “might have been” one or two instances in which the Government would have asked for alternative performance, but that it did not make such a demand upon Appellant. The Contracting Officer has made no specification to Appellant of what this was or might have been.

13. Therefore, Respondent has made no demands that appellant failed to accomplish. There are no damages. Appellant is entitled to be paid for the balance of the invoices due because it has provided the services the Government required and is entitled to be paid the daily price without deductions.
    
    COUNT II WAIVER
    
    

14. Appellant repeats and re-alleges each of the foregoing allegations in Paragraph Number 1 through Paragraph Number 13, as if fully set forth herein.

15. During the protest proceeding at the General Accounting Office, referenced in Paragraph No. 4 above, Appellant’s counsel promptly advised   Respondent’s counsel that the ____________ would require the ____________ to  meet  certain  technical  requirements  with the result that the would not be authorized to ____________. 

16. This  limitation  was reflected in ____________  certificate, which restricted ____________.

17. The ____________ also required that certain structural revisions be effected even to permit ____________  to operate at the reduced ____________ . This requirement was reflected in a Notice commonly referred to as, which is common in the ____________ industry.

18. It is also common for a number of minor “Notices” to be recorded,  which  require  correction,  but  do not  prevent ____________  from doing its work.

19. Appellant promptly advised the Contracting Officer's legal representatives of the temporary “Notice” issue and the reduced ____________  during the course of the protest proceeding so that the Government could deal with this issue immediately and not have its needs disrupted by this issue being raised at a later date.

20. The Government could have stopped the protest by withdrawing the award and commencing a re-competition. The protestor requested that the Government do just that.

21. The Government chose instead to proceed with the award and Appellant’s performance of this contract without reservation because it knew ____________ would fully perform the missions required of it.

22. Further, at the time the Contracting Officer’s representative was advised of the restriction (hereafter “the technical restrictions”) the ____________   had  not  yet  been  accepted  under  the  contract,  and the Contracting  Officer  gave  no  indication  that ____________  would  not  be accepted when tendered in accordance with the contract.

23. When the ____________  was so tendered, the Contracting Officer accepted  the ____________ under   the   contract   without   condition  or qualification. The issue of the pending technical restrictions was not raised or reserved in any fashion at acceptance.

24. Assuming any rights existed, the Government, by its actions or inactions described above, has waived any such right that it has to now object  to ____________ ability on  speculative  bases   when ____________  performed everything that the Government requested before the temporary technical restrictions were resolved.
    
    COUNT III
    
    THE GOVERNMENT’S BREACH OF CONSTRUCTIVE CONDITIONS OF COOPERATION

25. Appellant repeats and re-alleges each and every allegation in Paragraph Number 1 through Paragraph Number 24 as if fully set forth herein.

26. The Appellant worked diligently to cause the technical restrictions to be removed and was successful.

27. The  technical  restrictions restricted only ____________ . They did not prevent ____________  from performing its work under the contract.

28. The  technical  restriction  on ____________  was based upon theoretical consideration and theoretical analysis, which did not restrict the____________ from doing its work and fulfilling all the demands that the Government imposed upon it during this time. 

29. At   the  Government’s  direction, ____________  did perform throughout the entire period the restrictions were in effect.

30. There was no safety issue in ____________  performing its work.

31. The ____________ Agency recognized this, worked with the Appellant here cooperatively to remove the technical restrictions, and  did so in a brief period of time.

32. The Government refused to aid and assist Appellant in its dealings with ____________ , despite being fully informed as to all actions/analysis then taking place.

33. The Government was fully informed of all the events surrounding the issuance of the technical restrictions on, and Appellant’s efforts to clear the technical restrictions.

34. The Government made no objection in writing or orally.

35. The Government could have requested a National Defense Waiver. ____________  informed Appellant that such a  request  for  waiver would be immediately granted by it. The waiver would not have imposed any cost or delay on the Government.

36. Appellant advised the Government of this option, but the Government refused to exercise it.

37. Any damage the Government now alleges it experienced on possible missions it may have assigned, but did not due to the technical restriction, could have been easily avoided by its own action.

38. The Government’s failure to take action, and then blaming the contractor for “damages” it allegedly incurred, is a breach of the Government’s obligation of constructive condition of cooperation in performance of this contract. Appellant is entitled to be paid without deduction.
    
    COUNT IV
    
    INSPECTION CLAUSE APPLICATION

39. The Appellant repeats and re-alleges each allegation set forth in Paragraph Number 1 through Paragraph Number 38 above, as if fully set forth herein.

40. Post-dispute discussions with the Government indicate that the Government has not considered the mandatory FAR contract clause that covers the exact situation in this case – the standard “Inspection Clause” (52.212-4(a)(3)(i)(B). This standard FAR clause provides that the Government may only reduce the contract price to reflect the reduced value of the services performed. Thus, there must be proof of damages under the standard FAR clause before a payment deduction may be made.

41. The FAR “Inspection Clause” states as follows:
    
    If any of the services do not conform with contract requirements, the Government may require the Contractor to perform the services again in conformity with contract requirements, at no increase in contract amount. When the defects in services cannot be corrected by re- performance, the Government may –

    1. Require the contractor to take necessary action to ensure that future performance conforms to contract requirements; and

    2. Reduce the contract price to reflect the reduced value of the services performed. [Emphasis added.] … [Emphasis Added]

42. Significant ASBCA precedent requires proof of actual damages under the Inspection Clause.

43. The inclusion of any other clause in a contract that conflicts with the longstanding FAR Inspection Clause and its requirements is contrary to the FAR, and is not enforceable.

44. Including a clause that was interpreted to permit the Government to recover damages when it experienced no damages would be directly contrary to the FAR Inspection Clause, and would force contractors to include contingencies in their bids, increasing Government costs, which would violate longstanding federal procurement policies.

45. FAR §15-402 states that Contracting Officers must: “(c) Not include in a contract price any amount for a specified contingency to the extent that the contract provides for a price adjustment based on the occurrence of that contingency.” The Inspection Clause provides for the adjustment.

46. Based upon oral discussions with the Government, it appears that the basis for the Government’s failure to pay is allegedly due to a specially prepared and instituted only at the Government clause.

47. A special Government clause that it can use to recover money from a contractor for “damages” when it experienced no damages is directly contrary to the FAR Inspection Clause and Federal Procurement Policy and is prohibited. It likely violates federal statutes as well.
    
    
    
    
    
    
    

48. On information and belief, the Government has not requested or received required permission to use any such clause, which deviates from and conflicts with the FAR Inspection Clauses. Appellant is entitled to be paid the daily hire price without deduction.
    
    COUNT V
    
    THE CLAUSE
    
    

49. The Appellant repeats and re-alleges each allegation set forth in Paragraph Number 1 through Paragraph Number 48 above, as if fully set forth herein.

50. The  special  Government  Clause called the ____________  Clause provides as follows in Appellant’s contract:____________ .

51. This clause can and should be interpreted to be consistent with the mandatory FAR Inspection Clause, and to be in harmony with the Inspection Clause’s concept of recovery only when there are actual damages. The Clause as written allows a “proportionate” recovery to “indemnify” the Government for a “degradation” of warranties or an inability to operate at a “fully efficient state.”

52. “Degradation,” “proportionate,” and “fully efficient” are terms in the Clause that are consistent with the requirement for actual damages in the Inspection Clause. Also, “indemnity” is a term of equity consistent with the Inspection Clause’s requirement for actual damages.

53. The term “Proportionate” in the Clause cannot be interpreted or  applied  as  a  mathematical  formula  when  the ____________ was fully efficient for all of the missions called for by the Government.

54. Clauses in a contract must be construed in harmony with each other.

55. The terms of the Clause may not be interpreted to be essentially a liquidated damages provision when the Government chose not to use or negotiate a liquidated damages provision. Liquidated damages are the typical way to obtain a recovery without proving actual harm in instances where such proof would be difficult. Liquidated damages clauses state specific amounts of damages.

56. The Clause must be interpreted in a way consistent with the FAR mandatory Inspection Clause. When this occurs, Appellant is entitled to be paid without deduction. Any other interpretation of the Clause would be contrary to federal procurement policy, contrary to Government contract law precedent, contrary to the Inspection Clause, and therefore unenforceable.
    
    COUNT VI
    
    NO BREACH OF WARRANTY

57. Appellant repeats and re-alleges each and every allegation in Paragraph Number 1 through Paragraph Number 56 as if fully set forth herein.

58. The Government is apparently asserting Appellant has breached a warranty in the contract. Even if there was a breach of warranty by Appellant, the Government has made no attempt to harmonize the special Clause that it drafted with the FAR, its own actions, accepted contract law, or ASBCA precedent.

59. This special, non-FAR clause applies, by its own terms, to the “degradation” of a “warranty”, the “proportionate decrease” thereof, and then “indemnity” for such events.

60. The Government accepted the ____________ when it knew of the technical restriction, and used it fully until the restriction was removed, and thereafter.

61. For there to be “degradation” of a “warranty”, such action must come after acceptance. The Government knew the technical restriction  was  placed  on  the ____________ before  it  accepted  the ____________ . There was no “degradation” after acceptance. And, for there to be an “indemnity”, there must be damages for that indemnification to operate upon. There are no damages here.

62. For there to be a “warranty” and a breach thereof, there must also be a real loss as a result of the warranty’s breach. e.g., Dale Construction v. United States, 168 Ct. Cl. 692 (1964). There is no Government loss here.

63. The Clause, by its own terms does not apply to the circumstances presented by this appeal.
    
    COUNT VII
    
    CONFLICT WITH ASBCA PRECEDENT
    
    

64. The Appellant repeats and re-alleges each allegation as set forth in Paragraph Number 1 through Paragraph Number 63 above as if fully set forth herein.

65. The Government's assertion that it may recover “damages” in a situation where it has in fact received the performance that it asked for is directly contrary to existing ASBCA precedent.

66. The Armed Services Board of Contract Appeals has dealt with exactly this subject in interpreting the similar____________ clause used by the Government in its contracts. The ASBCA has held unequivocally that ____________.

67. The____________ Clause is much more specific than the ____________ Clause, and the Board has interpreted it as not applying when the Government asks for specific work, which it receives. The “speculation” that the Government could have asked for ____________ , is exactly that - speculation, which the Board disregarded in the ____________ case.

68. Appellant submits that the Board, under its precedents, would not permit withholdings under the Clause when the Government has not specifically asked the contractor to perform in any fashion that it was unable to perform. As stated above, the Government made no request formally or informally in writing or orally that ____________  was unable to perform. Any other Government arguments about what ____________  could not do are exactly the type of “speculation” that the____________  decision above state must be disregarded.

69. Had the Government wished to accomplish a result contrary to the mandatory FAR Inspection Clause, and contrary to ASBCA precedent, it was required to undertake the FAR deviation procedures. It did not. Appellant is entitled to be paid the daily hire price without deduction.
    
    COUNT VIII
    
    BREACH BY FAILURE TO PAY
    
    

70. Appellant repeats and realleges each and every allegation in Paragraph Number 1 through Paragraph Number 69 as if fully set forth herein.

71. The Government has provided no written justification for withholding amounts; it has simply taken ____________ % of the total amounts due, and failed to make these payments.

72. There has been no written articulation of legal or contractual bases for making these withholdings, which are now outstanding for over ____________ . This unilateral decision to reduce contract payments is itself a breach of contract. (See, e.g., Brooklyn & Queens Screen Manufacturing Company v. United States, 97 Ct. Cl. 532, (1942)). Appellant is entitled to its damages for this failure to make payments when due.
    
    COUNT IX COMMERCIAL CONTRACT

73. Appellant repeats and re-alleges each and every allegation in Paragraph No. 1 through Paragraph No. 72 as if fully set forth herein.

74. This is a commercial services contract. The Government is making interpretations and assertions that are contrary to established law, contrary to commercial practices, and contrary to the well understood meaning of the FAR Inspection Clause and Government policy. Such interpretations are impermissible and violate the FAR and established federal procurement policy.
    
    COUNT X 
    
    PAYMENTS NOW DUE

75. Appellant repeats and re-alleges each and every allegation set forth in Paragraph Number 1 through Paragraph Number 74 above, as if fully set forth herein.

76. The FAR requires that Contracting Officers find and pay the amounts they believe are due to a contractor in their final decision, notwithstanding the pending of an appeal. 48 CFR 33.211.

77. On information and belief, Appellant submits that the Contracting Officer has found that the contractor is entitled to a release of withholdings in a specific amount.

78. Appellant asks the Board for an Order that this amount be immediately paid to Appellant during the pendency of this appeal.
    
    COUNT XI
    
    GOVERNMENT CALCULATION METHOD IS IRRATIONAL

79. Appellant repeats and re-alleges each and every allegation set forth in Paragraph Number 1 through Paragraph Number 78 above, as if fully set forth herein.

80. The Contracting Officer apparently  asserts the ____________  percent price deduction on the basis that the ____________  was  restricted by ____________ percent due to the short-term issuance of the technical restrictions.

81. Such  a____________  percent deduction basis is irrational for the following reasons: ____________ .

82. Appellant is entitled to be paid without deductions.
    
    WHEREFORE, Appellant asserts that on the basis of Counts I through XI above, on each individual Count, and then as a whole, it is entitled to payment  of  the  amounts  withheld  from  its  invoices of $ ____________ , (as updated  to currently $____________ ), plus interest at the Contract Disputes Act rate from the date of the certification of its claim, and all other relief to which it is justly and properly entitled.
    
    Respectfully submitted,

Drafting Checklist - Complaints

Long versus Short Form

None of the above example complaints is particularly long, but you can see different levels of pleadings. Our recommendation is that you plead Complaints in this manner, depending upon how well you know your case and how confident you feel about it. If you are  uncertain, or only know certain key facts, keep things short until you become more comfortable. In other words, do not embarrass yourself.

Obviously you have an obligation to be sure that you are correct in the overall allegations that you are making against the Government.

Case Law

Note that in the examples above only key case law was pleaded in particular areas. This is somewhat unique to Government contract practice, but not necessarily so. If you know the key case law that supports your case, plead it in the complaint.

Short Allegations

You are dealing with Government professionals on the other side, not commercial lawyers. They feel an obligation to respond fairly and fully to allegations that you are making. Take the opportunity to use this system. Keep your allegations short and brief. You will get better  responses to them, and will also know the other side's positions better.

Procedural Materials

Plead the certification of the claim. Plead your  corporate existence. Make reference to the contract at issue or series of contracts. State whether there has or has not been a final decision.

Need Answer for Summary Judgment Motion Filing?

Initial filings may also include a partial or complete summary judgment motion if you have satisfactory documentation already in hand, or if the contracting officer’s final decision provides statements that can be used.

Recall that you must eliminate all reasonable factual disputes on the issue for which are moving for summary judgment. The Government may not agree with your legal position – that is fine - but the facts that you are basing the motion upon must be without serious dispute. This occurs at times before the Government files its answer to your complaint.

If there are factual disputes pending that must be resolved before you can move for summary judgment, receipt of the Government's answer may well do that.

If the answer does not provide the information needed to show that there are no material factual disputes, then the next step would be to see if the answers to interrogatories, document production, or answers to request for admissions will solve the problem.

If none of that works, then perhaps taking one critical deposition will solve the particular problem. We have seen this occur a number of times. One key decision-maker states answers on the record to questions you pose that are sufficient for the contractor to move for summary judgment.

Virtually all of the foregoing strategy issues work equally as well for the Government if it chooses to be aggressive in the litigation.

Handling Government Time Extension Requests

Once the litigation commences, you need to make a reasonable effort to get along with your Government (or contractor) counterpart.

At the Court of Federal Claims the Justice Department gets 60 days to answer - it routinely asks for one 30 to 60 day extension and perhaps more.

If you really must move the litigation forward (It is a declaratory judgment action), you can refuse to grant the time extension and fight that issue before the Court when the Government files for the time extension without your consent.

The authors were involved in a declaratory judgment action similar to that in Alliant Tech Systems, supra. The action was fast-moving. Numerous briefs were filed throughout the Christmas holidays. Neither party asked the other party for a time extension because they knew it was inappropriate to do so.

The same general rule of thumb exists at the Boards of Contract Appeals - the Government gets 30 days to answer and may ask for a 30 day extension.

Another approach is to tell the Government the seriousness of your case and the financial impairment that it is causing to the contractor. Tell the Government candidly that you cannot give them any time extensions beyond the Board’s or Court’s Rules, and that you will have to resist each time extension. That has the advantage of candor. You are telling your counterpart upfront what you are going to do even though they may object to it and will fight you in court. We believe there are less hard feelings with this approach.

Audits as Part of Litigation

It is a serious mistake to ignore the issue of audits in litigation. The Government will not conclude an important settlement or generally routine cases without some sort of an audit. Perhaps the audit has  already been done by an agency such as DCAA as part of the contracting officer’s final decision process.

If an audit has not been done, then it must be scheduled and take place before the Government can realistically resolve the case. The contractor should recognize this, and take some level of control over pushing the process forward.

Contractor Control of the Process

The contractor should make its analysis of what audits have not been done or what audits will likely be required. If the contract dispute involves a constructive change, an audit is going to be required of the cost that the contractor alleges it incurred as a result of the constructive change. Get this issue resolved promptly. Get the audit scheduled as  soon as possible. Try to do this voluntarily with your Government counterparts. If they will not agree or state that they need additional time to determine what sort of audit to perform, move to the next step below.

Motion to Board/Court

There is no reason that a contractor cannot take the initiative, and file a motion to schedule the audit. In many cases it is very clear and obvious that an audit needs to be conducted. State those reasons to the Board. In other cases it is more obscure. You are going to need to persuade the Board in those situations. Do a good job in your motion  filing. See the motion sample earlier in the materials.

The Auditor Should Assist Both Parties

There is no earthly reason why only the Government should get the benefit of a DCAA audit. The Government should not be allowed to dictate to the auditor the "bad" or "harmful" issues that it wishes to have the auditor look for and produce its report upon.

An audit report should be fair, evenhanded, and cover all issues likely to arise in the litigation. However, if the contractor does not assert its rights to the Government, and if necessary to the Board, to have such an audit prepared, it will be stuck with a one-sided, Government issues only audit report. That must be avoided.

To do this, the contractor must think through the audit issues that it needs to dispose of in the report. It must commit those to writing, and provide that to Government counsel. It must also prepare the motions as set forth above if necessary.

Entrance and Exit Interviews

The DCAA auditors are used to having entrance and exit interviews with contractors on normal cost allowability disputes that do not involve a contracting officer’s final decision and litigation. Why should that procedure be any different once litigation is involved.

The contractor should request to have an entrance and exit interview. During the entrance interview and preferably before, it should provide the Government auditor with the pertinent pleadings that have been filed in the case and some statement of the audit issues that it believes require resolution. The auditor will deal with these issues if told about them. It will feel compelled in most cases to do so. If not, it can be compelled to do so by the Board. See the motions above.

Exit interviews are also important, although perhaps not as important as entrance interviews. Now the Government has completed  its audit work and is preparing to write up its findings. It is still worth trying  to engage the auditor to find out what its findings are and to provide ideas that perhaps the auditor has not considered. In addition it is an opportunity to suggest additional audit topics that would clarify the matter in the contractor's favor or simply verify it so that the Court or Board can reach a fair decision.

Witnesses

Part of trial preparation, even before filing the complaint and opening pleadings as discussed above, is choosing who the contractor's witnesses are going to be. It is possible that the contractor's witness may have left the company and be employed elsewhere. These present challenging people to deal with.

Our initial recommendation is that contractors determine who its witnesses are going to be as soon as it appears that a final decision is going to be issued. It then needs to submit a simple  consulting  agreement to each of the witnesses if they determine to leave the company. This consulting agreement compensates the witness for their lost time, which is appropriate legally and ethically for fact witnesses. See the draft agreement below.

Witness and Consulting Agreement

 ____________   has determined to seek employment with another company. ____________ recognizes  that  it  has  important  information concerning ____________  that was required during the course of their employment.

____________  agrees that it will return to the company for no more than ____________  hours per month to provide analysis and work with respect to this issue, and that if necessary it will prepare with the employer’s lawyers for trial, and appear at the trial of the case as a fact witness as to these issues.

The contractor agrees to pay the potential witness for their consulting services and witness preparation time based upon the time that was lost from their new position. The payment rate has been calculated by dividing the average hours per month less vacation time (1800 hrs) into the yearly salary with bonuses and benefits of the individual (____________ ) establishing therefore an hourly rate for lost time of ____________.

Payments will be made for consulting and witness preparation amounts monthly upon submission of a time statement by the employee.

Signatures:

The foregoing simple statement, or something along these lines, will be signed by most people before they leave employment. They feel responsible and are concerned about the issue that they participated in, which is going through the disputes process. They will most often agree to consult and appear as a witness before they leave. Once they leave, however, attitudes can change. Employees approached a year or two after they have left are often unwilling to help.

Choosing and Using Former Employees

Both current and former employees used to present a case at trial should obviously not be interested or prejudiced with respect to the litigation. If so, this will come out during the course of the hearing.

Think through carefully the appearance that the witness will present given whatever job it currently has with the company or with a new employer. Are there compensation impact issues?

Think through how closely the witness has followed the dispute, and whether it suffered or will suffer as a result of a negative decision. That obviously colors the individual’s testimony.

Also interview and talk with the witness candidly about what has happened in the past and what will go on in the future. If you have options, try to choose other people if you are dissatisfied with a witness for any reason. You can then make that witness a secondary source, and go to another primary source.

Who Not to Choose

Do not choose people who are difficult to deal with - if you have that option. Their coworkers will tell you or it will generally be known in  their section or area of work. Do not deal with people as witnesses, who are disgruntled or dissatisfied and who are about to leave the company. That will only make your task more difficult.

Do not use someone that you must "turn" as a witness before you can use them. In other words, if the witness does not support your position now, why are you so certain that you can turn them to support your position before trial? If other options are available, use them.

Ideally choose someone who is firmly committed to the position that the company is taking and believes in it. That may not always be possible - in that case find someone who will be able to provide a low-key factual basis that supports the position that the company needs to establish in order to prevail.

Do not neglect the other side of the case. Think through who the Government's witnesses must be, as well as who the Government's secondary witnesses may be. Their choices will affect the witnesses that you choose.  This will also affect how many depositions you must take.  You need to factor this into the possible budget available as you will need to get the stories of these key Government witnesses. You may be able to pass on depositions for secondary witnesses.

Talk to knowledgeable people and evaluate how strong or weak the Government's key witnesses are. You may choose to take the weaker key witness depositions first to show the Government the problems that they present.

Requests for Admissions

Requests for admissions are a very useful tool in pretrial discovery proceedings. Many people believe that they should not be filed until  near the end of discovery. We disagree. While it may be wise to file a second or third set of requests for admissions, it is very useful to file an opening set of requests for admissions.

A Useful Tool

It is often not well understood what the response to a request for admission must contain. Look at Federal Rule of Civil Procedure Rule 36, and related treatise materials for further explanation. In summary, the request for admission if properly framed must be answered, or if only parts of the request can be answered then the applicable parts must be responded to, or the Government must state the reasons for its denial.

Do not assume that you can simply blow off a request for admission and deny simply because one word or phrase is out of order in the  request for admission. That is not correct and done frequently enough will likely draw a motion for sanctions. You must work at answering requests  for admissions, and not just deny them. This is often not appreciated.

Requests for admissions also serve another very useful function even if they are going to result in a denial. They show the other side what it is you believe you can establish short of or at trial. They command attention if done properly, and they educate the other side as to the weakness of their case.

Proper Drafting

We have set out below typical requests for admissions filed early in proceedings at the ASBCA. The case immediately below involved the refusal of the Government to reimburse costs in accordance with previous practices. Read through and look at the points the contractor is pressing and why he is pressing them. We will discuss these matters during the course.

Example One

BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of ____________ 

Under Contract  ____________  

ASBCA No. ____________ 

FIRST REQUEST FOR ADMISSIONS UNDER RULE 15

Pursuant to the instructions in Federal Rules of Civil Procedure 36 and pursuant to Board Rule 15, you are requested to admit or deny the truth of the following Requests for Admissions within forty-five (45) days: (Appellant means ____________  performing contracts for THE AGENCY.)

1. Admit that THE AGENCY has reimbursed Appellant under prior Government contracts with THE AGENCY (preceding the award of the instant contract) for ____________ .

2. Admit that THE AGENCY has permitted Appellant to____________  at THE AGENCY’s own facilities, or at THE AGENCY contracted facilities, at no cost.

3. Admit  that under the ____________ contracts between THE AGENCY and Appellant, Appellant was reimbursed for the cost of ____________ .

4. Admit that under the ____________ contracts between THE AGENCY and Appellant, the Appellant was allowed to use THE AGENCY, or THE AGENCY contracted facilities, to take ____________ at no cost.

5. Admit that prior to the award of Appellant's current contract, THE AGENCY,  either reimbursed for ____________ , or allowed contractors to take ____________ to THE AGENCY’s facilities or its contracted facilities at no cost to contractors.

6. Admit that prior to award of Appellant's contract for the ____________ , Respondent's department either reimbursed  for ____________ , or allowed contractors to take____________ to its facilities or its contracted facilities for ____________  at no cost to contractors.

7. Admit that THE AGENCY has in the past included in THE AGENCY contracts specific statements that____________ will be at the Government expense.

8. Admit that in Appellant's ____________ contract at paragraph ____________  Respondent stated that the____________ would be at the Government's expense.

9. Admit that THE AGENCY has records that would verify whether  ____________ have been reimbursed for ____________  before the award of Appellant's contract at issue.

10. Admit that THE AGENCY has records that would verify whether the Respondent and/or its contractors have taken ____________ at no cost.

11. Admit that the Contracting Officer has taken the position that because THE AGENCY does not  pay for ____________ on the contract, THE AGENCY will not pay for ____________ .

12. Admit that the Contracting Officer has taken the position that ____________  may have been reimbursed for ____________.

13. Admit  that  ____________  is not reimbursed by THE AGENCY in any contract.

14. Admit  that the same ____________  provision is used by all groups at THE AGENCY with any differences in the mission and requirements addressed at the beginning of the contract.

15. Admit that prior to the award of the subject contract, the Government failed to provide the Appellant with any notice that ____________  would not be reimbursed as charges under this contract, and/or that would not be taken and disposed of at no cost by the Government or its contractors.

Attorney for Appellant

Example Two

BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of  ____________   

Under Contract  ____________

ASBCA No.   ____________  

FIRST REQUEST FOR ADMISSIONS UNDER RULE 15

Pursuant to the instructions in Federal Rules of Civil Procedure 36 and pursuant to Board Rule 15, you are requested to admit or deny the truth of the following Requests for Admissions within forty-five (45) days:

1. Admit that from the date of contract award to this date the Government has never requested in writing that  ____________ perform, which  failed to perform.

2. Admit that from the date of contract award to this date the Government never orally asked that ____________  perform ____________ , which ____________  failed to perform.

3. Admit that the Government had no actual out-of-pocket damages as a result of ____________ .

4. Admit  that  prior  to   acceptance  of ____________ , the Government issued no written exception or reservation to that acceptance because of ____________ .

5. Admit that the Government performed no evaluation of the limitations that could impose upon the ____________ ’s ability.

6. Admit that the Government knew ____________ would have accepted  a  waiver request from ____________ , and would have exempted ____________  from compliance with the rules that required the ____________ .

7. Admit that the Government did not use a liquidated damages clause  or  provision  in  the  subject  contract  insofar as____________ is concerned.

Attorney for Appellant

Drafting Checklist - Request for Admissions

Winning Issues

Outline the issues that let you win your case, or that will perhaps put you in a position to move for summary judgment.

Capture these thoughts in crisp requests for admissions. Recognize that if you over plead, and/or fail to be brief and to the point, and non-controversial, you are setting the other side up for the right to deny your request.

Keep it Simple, Short, and to the Point

As Sergeant Joe Friday said on Dragnet: "Just the facts ma’am, just the facts". That should be your watchword in drafting requests for admissions. Just get the facts out that you believe the other side must admit, and that help you take the next step in your overall litigation plan.

Send the Other Side a Message

An ancillary benefit to requests for admissions and other discovery is that you get the opportunity to further brief the other side as to the details of your case. Litigation is not a situation in which blind man's bluff is a good game to play. Tell the other side candidly the strengths of your case in detail, and get the information that you need to prevail or receive a good settlement.

Tightly drafted requests for admissions show the other side what you think you can prove at trial. That is an appropriate message to send.

Follow-up Sets Are Required

Depending upon the Government’s answers to the request for admissions (or the contractor’s), follow-up sets may be appropriate.

Once you have competent answers from the other side, you can tighten your requests for information, and hopefully tie the other side down to particular specific points. Do not miss this opportunity.

Interrogatories and Document Production

These are the tried and true methods of discovery at the Board of Contract Appeals, the Court of Federal Claims, and in federal and state courts for that matter as well. Attorneys generally draft these documents too broadly so that it gives the other side interpretation and wiggle room to not respond. Precise drafting is important. Short questions and statements are important.

There is no immediate limitation on the number of interrogatories or document production requests that may be posed at the standard Government contract forums. Therefore, be to the point and brief in each version.

“State Your Legal Position” Interrogatories

Interrogatories generally ask about the other side's position or information that may be available on a particular point. They may be followed up on by submitting a companion document production request.

If the case involves legal issues that require resolution, it is appropriate to have tightly drafted interrogatories that require the other side to "state their legal position on "

Document Production Requests

Document production requests generally specify areas or groupings of documents that the other side should produce. Many of these documents at the Boards of Contract Appeals should have been produced in the Rule Four file.  A similar practice should occur at the Court of Federal Claims generally it does not.

Be all encompassing and specific at the same time in drafting document production requests. Take the time to think through the issues  in the case. Get help from knowledgeable individuals as to the types of documents the agency would keep or produce in a particular situation.

Do not stop with the first document production request. Gather  your documents and look through them.

Take whatever document production the other side gives you and then file a second set of document production requests that focus in further.

Document production requests are a relatively economical form of discovery. One can sit in their office and do the document production request in several hours. With the assistance of paraprofessionals, the documents produced can be sorted and classified. If necessary, surrogate document forms can be created so that fairly large volumes of documents can be controlled.

Microsoft access works fine for such situations. Complex document control systems are generally unnecessary in Government contract cases.

Examples From Cases

We set out below examples of typical interrogatories and  document production requests for Government contract cases. We will analyze these and the approaches represented in class:

Interrogatory – Example One

An example of interrogatories from a typical contract case is set forth below:

BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of

Under Contract

ASBCA No.  

* * * * * * *

FIRST SET OF INTERROGATORIES TO RESPONDENT UNDER RULE 15

In accordance with Board Rule 15, Appellant hereby serves upon Respondent the following first set of Interrogatories. Appellant requests that the answers be made within 45 days and sent to the offices of _________.

INSTRUCTIONS OF INTERROGATORIES

1. You are requested to answer each Interrogatory on the basis of your entire knowledge and the entire knowledge of your agents, attorney, and/or their agents. If you cannot answer any Interrogatory in full, after exercising due diligence to secure the information to do so, so state and answer to the extent possible, specifying your inability to answer the remainder and stating whatever knowledge, information or belief you have concerning the unanswered portion.

2. If any Interrogatory is based in whole or in part on any opinion, so state in your answer and state whether it is in whole or in part, the name of the person or persons forming such opinion and each fact, matter, happening and writing used, consulted or referred to in forming such opinion.

3. The words and phrases used herein should be construed in their normal and regular manner as such words or phrases are typically used or defined.

4. The words “and” or “or” are intended to be construed conjunctively or disjunctively as necessary to make the Interrogatory inclusive rather than exclusive, and singular words are intended to include the plural and plural words are intended to include the singular, as necessary to make the request inclusive rather than exclusive.

5. The term “person” shall be deemed to mean any natural person, firm, association, partnership, corporation or other form of legal entity or Government body, unless the context indicates otherwise.

6. “Communications” shall mean oral, written, or electronic transmission of information to and/or from persons, inclusive communications where the recipient of the communication is not specifically identified in the communication, or where the recipient is the author, such as without limitation a written, electronic or memorandum to file. A communication includes the identity of the participants, the date, and the substance.

7. “Relating to” shall mean, either directly or indirectly, referring to, reflecting, describing, embodying, discussing, evidencing or in any way pertaining to. The object of the phrase “relating to” is to be included within the coverage of this definition.

8. The term “document(s)” or “documentation” includes every type of material that is producible under FRCP 34 and Board Rule 15 and includes any writing or recording of any nature or description, including handwriting, e-mail, photographing, Photostat, tape, wire, video, belt or disc recording, and every other means of recording upon any tangible thing in any form, including without limitation, drafts, originals and copies of books, calendars, planners, diaries, correspondence, memoranda, reports, minutes, notes, records, contracts, proposals, tickets, checks, bills, receipts, telegrams, papers of any character, tapes and their associated printer listings, wire, belt or video recordings, and copies of documents which are not identical, duplicates of the originals (e.g., microfilm, as opposed to hard copy), and material which has been otherwise photographically or electronically recorded, or any other physical material in the possession, custody, and/or control of the Respondent, its divisions, subsidiaries, agents, intermediaries, employees, or contractors.

9. Each Interrogatory and response thereto shall be construed and responded to independently and not be referenced to any other Interrogatory or Interrogatory response.

10. Singular words are intended to include plural and plural words are intended to include the singular, as necessary to make the Interrogatory inclusive rather than exclusive.

11. When an Interrogatory does not specifically request a  particular fact or facts, but such fact or facts are necessary in order to make the response to the Interrogatory either comprehensive, complete or not misleading, the Interrogatory shall be deemed specifically to request such fact and Respondent is to include such fact as part of its response.

Interrogatories

In accordance with FRCP 33 and Board Rule 15, and the “Instructions” above, Appellant requests that Respondent state its answers to the following Interrogatories:

1. Between  the  date  of  contract award and _________, identify with particularity each and every item that the Government considered for_________, but determined not to place the order with because of _________; identify all documents related thereto.

2. State with particularity the Government’s exact legal and contractual    contentions concerning _________; identify all documents related thereto.

3. Identify each and every individual participating in making the determinations set out in Paragraphs 1 and 2 above.

4. State with particularity the procedures followed in considering, drafting, and approving  the _________ Clause, used in Appellant’s contract; identify all documents relating in any fashion to your answer and the drafting and approval process.

5. State what, if any, consideration THE AGENCY gave to terminating the existing award during the course of the protest proceeding, and state the Government's rationale for whatever decision was made; identify all documents relating to this issue.

6. (a.) State with particularity the Government's definition/current interpretation of the following terms contained in the _________ Clause:
   
   (i.) degradation, (ii.) proportionate, (iii.) fully efficient, (iv.) indemnify, and (v.) warranty; identify all documents related thereto.
   
   (b.) State the Government's contentions as to each one of these five terms as it relates to the position taken in this litigation in supporting the deductions taken from Appellant’s payments due; identify all documents related thereto.

7. State with particularity the consideration/analysis made to the board's  decision  in  the _________ case  ( _________BCA  ¶ _________) before drafting the _________ Clause; identify all documents related thereto.

8. Identify all documentation of any kind prepared stating the Government’s intention to make withholdings of any kind because of _________.

9. Identify all documentation of any kind relating to the formulation, preparation, drafting, and/or use of the special Agency _________ Clause.

10. State with particularity each individual who provided input to these interrogatory answers, by individual answer.
    
    * * *
    
    Note: Interrogatory answers are to be signed under oath by the person making them: FCRP 33(b)(1) and (2).

Attorney for Appellant

Interrogatories – Example Two

BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of  _________  

Under Contract ________

ASBCA No. _________

* * * * * *

FIRST SET OF INTERROGATORIES TO RESPONDENT UNDER RULE 15

In accordance with Board Rule 15, Appellant hereby serves upon Respondent the following first set of Interrogatories. Appellant requests that the answers be made within 45 days and sent to the offices of _________.

INSTRUCTIONS OF INTERROGATORIES

1. You are requested to answer each Interrogatory on the basis of your entire knowledge and the entire knowledge of your agents, attorney, and/or their agents. If you cannot answer any Interrogatory in full, after exercising due diligence to secure the information to do so, so state and answer to the extent possible, specifying your inability to answer the remainder and stating whatever knowledge, information or belief you have concerning the unanswered portion.

2. If any Interrogatory is based in whole or in part on any opinion, so state in your answer and state whether it is in whole or in part, the name of the person or persons forming such opinion and each fact, matter, happening, and writing used, consulted, or referred to in forming such opinion.

3. The words and phrases used herein should be construed in their normal and regular manner as such words or phrases are typically used or defined.

4. The words “and” or “or” are intended to be construed conjunctively or disjunctively as necessary to make the Interrogatory inclusive rather than exclusive, and singular words are intended to include the plural and plural words are intended to include the singular, as necessary to make the request inclusive rather than exclusive.

5. The term “person” shall be deemed to mean any natural person, firm, association, partnership, corporation or other form of legal entity or Government body, unless the context indicates otherwise.

6. “Communications” shall mean oral, written, or electronic transmission of information to and/or from persons, inclusive communications where the recipient of the communication is not specifically identified in the communication, or where the recipient is the author, such as without limitation a written, electronic or memorandum to file. A communication includes the identity of the participants, the date, and the substance.

7. “Relating to” shall mean, either directly or indirectly, referring to, reflecting, describing, embodying, discussing, evidencing, or in any way pertaining to. The object of the phrase “relating to” is to be included within the coverage of this definition.

8. The term “document(s)” or “documentation” includes every type of material that is producible under FRCP 34 and Board Rule 15, and includes any writing or recording of any nature or description, including handwriting, e-mail, photographing, Photostat, tape, wire, video, belt or disc recording, and every other means of recording upon any tangible thing in any form, including without limitation, drafts, originals and copies of books, calendars, planners, diaries, correspondence, memoranda, reports, minutes, notes, records, contracts, proposals, tickets, checks, bills, receipts, telegrams, papers of any character, tapes and their associated printer listings, wire, belt or video recordings, and copies of documents which are not identical, duplicates of the originals (e.g., microfilm, as opposed to hard copy), and material which has been otherwise photographically or electronically recorded, or any other physical material in the possession, custody, and/or control of the Respondent, its divisions, subsidiaries, agents, intermediaries, employees, or contractors.

9. Each Interrogatory and response thereto shall be construed and responded to independently and not be referenced to any other Interrogatory or Interrogatory response.

10. Singular words are intended to include plural and plural words are intended to include the singular, as necessary to make the Interrogatory inclusive rather than exclusive.

11. When an Interrogatory does not specifically request a  particular fact or facts, but such fact or facts are necessary in order to make the response to the Interrogatory either comprehensive, complete, or not misleading, the Interrogatory shall be deemed specifically to request such fact and Respondent is to include such fact as part of its response.

    Interrogatories
    
    In accordance with FRCP 33 and Board Rule 15, and the “Instructions” above, Appellant requests that Respondent state its answers to the following Interrogatories:

1. With respect to the current contract action, identify all documentation prepared prior to the award of Appellant's instant contract in which there is discussion regarding the reimbursement of contractor expenses, including those for _________.

2. In connection with the solicitation, negotiation, preparation, and award of the subject contract, identify all documentation which comments upon or relates to reimbursement for contractor expenses, including those for _________.

3. With  respect to paragraph_________of  Appellant's  complaint, and the rejection of the invoice referenced therein, identify all documentation of  the_________Program  Office,  the  Contracting  Officer,  the  Agency Paying Office, or contractors in charge of payments, that comments upon, states, or records any and all positions concerning the reimbursement for contractor expenses, or _________.

4. With respect to the _________ contract, number _________, identify all documentation commenting upon or relating to the Agency’s reimbursement to Appellant, or its _________ companies, for _________.

5. With respect to the _________ contracts, identify all documentation commenting upon or relating to the Agency’s actions causing its contractor or its own facilities to  _________ at no cost to the contractor.

6. State in detail the Government's legal position as to why the past practice of reimbursing Appellant or its  companies for _________, did not become a portion of and requirement under the current contract in dispute.

7. State in detail the Government's legal position as to why the L.W. Foster Sportswear v. United States, 405 F.2d 1285 (Ct.Cl. 1969), case does not require the reimbursement of _________ under this contract, given the Government’s practice of reimbursing and/or taking _________ at no cost under other contracts with Appellant or its companies.

8. State in detail the Government's legal position concerning the relationship,  if  any,  between  the  nonpayment  for _________  under this contract and the non-reimbursement for _________.

9. With  respect to the _________ contracts, identify each and every document generated by the Agency or its contractors showing or commenting upon the reimbursement for _________  or the _________  at no cost to the contractor.

10. With respect to the _________ contract, identify each and every document  generated by the Agency or its contractors showing or commenting upon the reimbursement for _________ or the _________ at no cost to the contractor.

11. State in detail the Government's legal position concerning the distinction to   be drawn between the Agency’s reimbursement  for _________, or the  Agency’s _________ at  no  cost,  depending upon whether _________  are  involved.  (This  is  a  distinction  the  Contracting Officer apparently makes.)

12. State whether the Agency has gathered factual information after the  award  of  this  contract  concerning  whether _________ were _________  at no cost by the Agency to Appellant or its companies on prior contracts with the Agency, and identify all factual information so gathered and the documents in which such information is contained.

13. State whether the Agency has gathered factual information after the award of this contract concerning whether _________ were reimbursed, or _________ at no cost by the Agency, on prior contracts with other entities not related to the Appellant in this litigation, and identify all factual information so gathered and the documents in which such information is contained.

14. Referring to the Government’s Answer, paragraph _________ , state the Government’s legal position under the L.W. Sportswear case with respect to the following:

    • Do contracts with individual companies that are 100% owned by_________  qualify in the Government’s view as past performance actions under L.W. Sportswear?

    • Does the Government have access to any records of any kind regarding the contracts that Appellant, and its companies, have performed for the Agency in the last ten years?

    • If Appellant provides the list of all contracts it has held during the last ten years, does the Government have the ability to identify the contract files, including expense reimbursement records, relating to these individual contracts performed in the last ten years?

15.  Referring  to  the  Government’s  Answer,  paragraph _________ ,  with  respect to the Government’s statement that it has “insufficient knowledge”, will the Appellant’s provision of the list of its companies, and its list of contracts performed for the Agency in the last ten years, provide sufficient information for the Government to determine whether the L.W. Sportswear case applies to the current contract situation in dispute?

16.  With respect to the Government’s Answer, paragraph :

    • State whether the Government has the ability to determine when it has reimbursed for _________ on contracts it has placed over the last ten years.

    • If the Government states that it does not have the ability to so determine, state whether the Government has reimbursement records including invoices and/or other payment data from the last ten years for _________ ?

    • State specifically whether data, including but not limited to invoices and payment records, exists within the Agency that would determine, manually or electronically, the Agency’s reimbursement for _________ despite the Agency’s lack of contemporaneous records of just _________ reimbursement amounts.

17. With respect to the Government’s Answer, paragraph _________ :

    • Identify all documents, which show facilities, contractors’ equipment,  or policies of  the Agency  with  respect to _________    outside the continental United States.

    • State the geographic areas in which the Government provides for _________ .

    • Identify all documents stating the policies of the Government and procedures for _________ at each geographic area identified above.

18. With respect to the Government’s Answer, paragraph _________ :

    • State what knowledge the Government has, if any, concerning _________ compensation paid to Appellant, or its affiliated companies (beyond the _________) on contracts placed with Appellant by the Agency over the last ten years.

    • Identify all records that the Government possesses, or has control over, which could be utilized to determine past reimbursement to Appellant, or its affiliated companies, for _________ , or the _________ of _________ at a Government facility, occurring in the last ten years.

19. With respect to the Government’s Answer, paragraph _________ :

    • State all knowledge and information the Government has concerning the same or similar _________ reimbursement provisions as   those   included  in  paragraph  _________ of  the  _________ contract, in any other contract Appellant, or its affiliated companies, have performed for the Agency in the last ten years. 

    • State whether the Government has used the same or similar paragraphs to _________ in other Agency contracts, and if so identify those contracts.

20. With respect to the Government’s Answer, paragraph       , state   the Government’s precise legal position concerning why the reimbursement of _________ on a Government owned _________ is different than reimbursement of _________ under L.W. Sportswear v. United States.

21. With respect to the Government’s Answer, paragraph _________ :

    • State all of the Government’s information concerning the number of contracts Appellant has performed for the Agency, and state whether the Government’s contract and payment files, including invoice data, is available for each contract so identified.

    • State what information the Government needs to pull from its files, records, or storage depoes, to determine its reimbursement for _________ on all _________ contracts for the Agency.

22. With respect to the Government’s Answer, paragraph _________, to the extent not answered above:

    • State the Government’s legal position as to why non- reimbursement for _________in a contract means that _________ is also not reimbursable.

    • State the Government’s legal position under Foster Sportswear v. United States as to whether a long standing practice of  reimbursement  for _________ , or the taking of _________to Government facilities at no cost, is negated by the inclusion in the instant contract of the statement that the Government will not reimburse for purchases of _________.

23. With respect to the Government’s Second Affirmative Defense in its Answer:

    • State the Government’s exact legal position as to what proof of  the  incurrence of costs  for_________is required beyond an invoice from a vendor, a canceled check or other payment document, and/or an invoice to the Government for reimbursement.

    • To the extent that the Government identifies additional items to those listed immediately above that are required to prove such cost incurrence state with particularity what those items are.

    • State with particularity exactly what has not been provided by Appellant already with its invoices for _________that is required for the Government to make payment if payment is found due. Your interrogatory answer should state completely what the Government’s requirements are in terms of proof of cost incurrence by Appellant so that there is not a second dispute proceeding relating to this issue following a decision on entitlement by the  Board regarding the issue of the reimburseability of _________costs.

24. State the Government’s knowledge, position, and projections, if any, of the amount of _________ reimbursement, which is due to this date,or  may  become  due, under the_________ contract and/or through to the conclusion of the entire _________.

25. State with particularity each individual who provided input to these interrogatory answers, by individual answer.

* * *

Note: Interrogatory answers are to be signed under oath by the person making them: FCRP 33(b)(1) and (2).

Attorney for Appellant

Document Production Request – Example One

BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of _________

Under Contract _________

ASBCA _________

FIRST REQUEST FOR DOCUMENT PRODUCTION UNDER RULE 15

In accordance with Board Rule 15, Appellant hereby serves upon Respondent, the following Document Production Requests. Appellant requests that the responses and documents be made available for inspection within 45 days as provided by the Board’s rules.

Instructions for Document Production Requests

1. In each of your responses to these requests, you are requested to provide not only such information and/or documents in your possession, but also all information and/or documents in your custody or control or otherwise reasonably available.

2. In the event that you are able to provide only part of the information and/or documents called for by a particular request, please provide all the information and/or documents you can provide and state the reason for your inability to provide the remainder.

3. If you object to any portion of a request, provide all information called for by that portion of the request, which you do not object to or to which you intend to respond. For portions of any request to which you object, state the reason for such objection.

4. If you claim privilege for any document, identify the document by (a) author, (b) address, (c) date, and (d) subject matter, and state the facts that demonstrate why the document is entitled to the privilege asserted. Notwithstanding a claim that a document is privileged, the document must be produced with the portion subject to the claim of privilege excised.

5. All documents described below shall be produced separately for each numbered item or category listed below and the documents produced shall be organized such that said response will accurately reflect the production of documents or absence thereof for each numbered item or category.

6. If any document requested herein is unavailable or has been destroyed:

   • Please identify all persons who have or have had personal knowledge of the information contained in such document;

   • Please identify all persons who have or have had a copy of such document; and

   • If the document was destroyed, please describe the time and circumstances under which such document was destroyed.

7. If any document is the subject of more than one request, the document need be produced only in response to the first such request (unless the document is in a different form or with writing added or deleted), but any omitted documents shall be identified in response to all requests.

8. Unless otherwise indicated in a particular request, the words and phrases used in these requests should be construed in their normal and regular manner as such words or phrases are typically used or defined.

9. The words “and” or “or” are intended to be construed conjunctively or disjunctively as necessary to make the Document Production Request inclusive rather than exclusive; and singular words are intended to include the plural and plural words are intended to include the singular, as necessary to make the request inclusive rather than exclusive.

10. “Relating to” shall mean either directly or indirectly, constituting, referring to, reflecting, describing, embodying, showing, discussing, evidencing, or in any way pertaining to. The object of the phrase  “relating to” is to be included within the coverage of this definition.

11. “Communication” shall mean any statement or message transmitted, either orally, in writing, or through electronic media, including but not limited to, documents as defined herein and direct interpersonal statements.

12. The term “document(s)” or “documentation” includes every type of material that is producible under the Federal Rules of Civil Procedure 34, and includes any writing or recording of any nature or description, including handwriting, typewriting, printing, e-mail, photographing, photostat, tape, wire, video, belt or disc recording, and every other means of recording upon any tangible thing in any form, including without limitation, drafts, originals and copies of books, calendars, pocket calendars, pocket planners, diaries, correspondence, memoranda, reports, minutes, notes, records, contracts, proposals, airline tickets, checks, bills, receipts, telegrams, papers of any character, tapes and their associated printer listings, wire, belt or video recordings, and copies of documents which are not identical, duplicates of the originals (e.g., microfilm as opposed to hard copy), and material which has been otherwise photographically or electronically recorded, or any other physical material in the possession, custody, and/or control of Respondent, its agents, intermediaries, employees, or subcontractors.

13. “Person” shall mean any individual, firm, partnership, association, corporation or other legal, business, or Government entity.

Document Production Request

1. Produce for inspection and copying all of those documents identified or referred to in response to Appellant’s First Set for Interrogatories dated the same date as this Document Production Request.

2. Produce for inspection and copying all documentation retained by, or held by, or available to Respondent that relates in any fashion to _________, including but not limited to the reimbursement of ________,  policies  with respect to _________,  contractors  who will undertake _________, and Government facilities available for _________.

3. Produce for inspection and copying all documentation commenting upon or stating conclusions concerning the claim Appellant submitted under the Contract Disputes  Act dated _________in dispute here.

4. Produce for inspection and copying all documentation, which relates to or evaluates the amounts set out in Appellant’s Claim of _________, and Respondent’s denial of Appellant’s request for the reimbursement of _________ costs.

5. Produce for inspection and copying all Agency documentation of any kind, without regard to the Program Office involved, that deals with policies, positions, or procedures, for _________ reimbursement or _________.
   
   Attorney for Appellant

Document Production Request – Example Two

BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of _________ Under Contract _________  

ASBCA _________

FIRST REQUEST FOR DOCUMENT PRODUCTION UNDER RULE 15

In accordance with Board Rule 15, Appellant hereby serves upon Respondent, the following Document Production Requests. Appellant requests that the responses and documents be made available for inspection within 45 days as provided by the Board’s rules.

Instructions for Document Production Requests

1. In each of your responses to these requests, you are requested to provide not only such information and/or documents in your possession, but also all information and/or documents in your custody or control or otherwise reasonably available.

2. In the event that you are able to provide only part of the information and/or documents called for by a particular request, please provide all the information and/or documents you can provide and state the reason for your inability to provide the remainder.

3. If you object to any portion of a request, provide all information called for by that portion of the request, which you do not object to or to which you intend to respond. For portions of any request to which you object, state the reason for such objection.

4. If you claim privilege for any document, identify the document by (a) author, (b) address, (c) date, and (d) subject matter, and state the facts that demonstrate why the document is entitled to the privilege asserted. Notwithstanding a claim that a document is privileged, the document must be produced with the portion subject to the claim of privilege excised.

5. All documents described below shall be produced separately for each numbered item or category listed below and the documents produced shall be organized such that said response will accurately reflect the production of documents or absence thereof for each numbered item or category.

6. If any document requested herein is unavailable or has been destroyed:

   • Please identify all persons who have or have had personal knowledge of the information contained in such document;

   • Please identify all persons who have or have had a copy of such document; and

   • If the document was destroyed, please describe the time and circumstances under which such document was destroyed.

7. If any document is the subject of more than one request, the document need be produced only in response to the first such request (unless the document is in a different form or with writing added or deleted), but any omitted documents shall be identified in response to all requests.

8. Unless otherwise indicated in a particular request, the words and phrases used in these requests should be construed in their normal and regular manner as such words or phrases are typically used or defined.

9. The words “and” or “or” are intended to be construed conjunctively or disjunctively as necessary to make the Document Production Request inclusive rather than exclusive; and singular words are intended to include the plural and plural words are intended to include the singular, as necessary to make the request inclusive rather than exclusive.

10. “Relating to” shall mean either directly or indirectly, constituting, referring to, reflecting, describing, embodying, showing, discussing, evidencing, or in any way pertaining to. The object of the phrase  “relating to” is to be included within the coverage of this definition.

11. “Communication” shall mean any statement or message transmitted, either orally, in writing, or through electronic media, including but not limited to, documents as defined herein and direct interpersonal statements.

12. The term “document(s)” or “documentation” includes every type of material that is producible under the Federal Rules of Civil Procedure 34, and includes any writing or recording of any nature or description, including handwriting, typewriting, printing, e-mail, photographing, photostat, tape, wire, video, belt or disc recording, and every other means of recording upon any tangible thing in any form, including without limitation, drafts, originals and copies of books, calendars, pocket calendars, pocket planners, diaries, correspondence, memoranda, reports, minutes, notes, records, contracts, proposals, airline tickets, checks, bills, receipts, telegrams, papers of any character, tapes and their associated printer listings, wire, belt or video recordings, and copies of documents which are not identical, duplicates of the originals (e.g., microfilm as opposed to hard copy), and material which has been otherwise photographically or electronically recorded, or any other physical material in the possession, custody, and/or control of Respondent, its agents, intermediaries, employees, or subcontractors.

13. “Person” shall mean any individual, firm, partnership, association, corporation or other legal, business, or Government entity.

Document Production Request

1. Produce for inspection and copying all documentation commenting upon or stating conclusions concerning the claim Appellant submitted under the Contract Disputes Act dated _________.

2. Produce for inspection and copying all documentation, which relates to or evaluates the amounts set out in Appellant’s Claim of _________, and the Government’s deductions from Appellant’s payments for _________.

3. Produce for inspection and copying all documentation, which records in any fashion how the Government calculated the amount of the deductions actually taken from Appellant's invoices under this contract.

4. Produce for inspection and copying all documents stating or recording in any fashion performance tasks considered for _________ from the date of contract award, until the date of this request.

5. Produce for inspection and copying all documentation generated by the Government prior to contract award, setting forth its selection and designation of the subject contract as one for “commercial services".

6. Produce for inspection and copying all the documents, of any kind, generated  before  or after the _________was accepted relating to or commenting, in any fashion, upon the pending _________.

7. Produce for inspection and copying any documentation commenting upon the consideration of whether a national defense waiver should be asked for by the Government from the _________ for the pending _________.

8. Produce for inspection and copying all documentation in which the Government analyzes the technical, financial, or other issues raised by the _________.

9. Produce for inspection and copying all documentation by the Government, which records the Government's analysis of the technical solutions _________was proposing to _________for _________.

10. Produce for inspection and copying all documentation relating to comments to and from the sponsor agents (_________) generated by or to the Government, relating to the presence of the _________ when the _________ was scheduled or taking place.

11. Produce for inspection and copying all documentation commenting upon or relating in any fashion to the _________, which was generated by or sent to the Government.

12. Produce for inspection and copying any and all documentation relating to or recording any alleged damages or increased costs experienced by the Government as a result of the _________.

13. Produce for inspection and copying any and all documentation sent to the _________ or received by the Government from the _________ commenting upon, in any fashion, the pending _________.

14. Produce for inspection and copying any and all documentation commenting upon or stating the desirability of or the considerations in requesting a national defense waiver of the _________.

15. Produce for inspection and copying all documentation generated since  the  receipt  of  appellant's  claim  on _________, which in any fashion states technical, financial, or operational evaluations, and which states any amounts of money that could or should be paid to the Appellant relating to the withholding.

16. Produce all documents identified in your Response to Appellant’s Interrogatories, First Set, dated _________.
    
    Attorney for Appellant

Drafting Checklist- Interrogatories

State your Legal Position on Various Points

As set forth in the opening discussion in this section, these types of interrogatories are appropriate. Draft them tightly. Get the information that you need.

Review your Complaint and Support It

You should have pleaded things in your complaint that you need to win at trial (or to receive an appropriate settlement short of trial). Go through each one of the allegations and determine how you are going to prove them.

If you can get help from the other side, through either their identification of documents or from their answers to specific questions, do so through your interrogatories by asking for that information.

Broad, Open-Ended Interrogatories versus Short Narrow Ones.

Our recommendation is that you use both approaches. Be as specific as you can with all of your interrogatories. Then go back and ask broader interrogatories that request the identification of documents, which you are not sure exist, etc. You will get denials on some of the broad ones, but that is to be expected.

Covering issues in the case in a comprehensive and thorough manner in your interrogatory requests also prevents the other side from later maneuvering around positions which you tied down earlier on.

Continuing Interrogatories

All interrogatories are continuing. But deal with the continuing interrogatory issue in writing frequently.

State the other side’s requirement for doing so, but follow-up yourself and if needed ask the interrogatories again by reference. Do not rely upon the other side to remember their obligations to provide continuing information.

Inquire Specifically and Frankly

Ask   the   Government:   "Did   the   Government take _________    action";  “Has  the  Government paid for _________ in the past with federal funds";  “Has  the  Government  denied _________ in the past"; along with whatever other types of specific questions are appropriate to the situation involved.

Your questions must be relevant and lead to the production of discoverable information. If you ask what the Government has done  on the contract at issue, and on related contracts, that will probably work.

If you ask the Government what it has done Government- wide, that is probably too broad and will most likely at least lead you into discovery squabbles. Avoid them if possible, but do not be afraid to push as far as you can. You can always accept an objection and take no action upon it from the other side.

Drafting Checklist – Document Production Request

Get Help From Knowledgeable Individuals

If you were not intimately involved in the performance of the subject contract, you probably need help as to what type of documentation the Government was keeping.

If you are not familiar with the record-keeping habits of the particular agency in detail, seek help from company employees who understand them, and can pinpoint the type of documents the agency would keep as to the performance of a contract like the one at issue.

This is one area of discovery in which it is difficult to ask for the production of documents relating to the particular contract in dispute, or relating to the way the agency normally does business, if you are not familiar with these matters. There are company employees who can help you.

What Documents Are Important For Trial?

As discussed in the foregoing section, you need to follow up on what documents should be available, and specifically as to what documents you need for trial. Ask for them.

But, also ask for broad categories of production that relate to your specific contract. You are not clairvoyant. You cannot know exactly what the Government created. Ask for categories as well as specifics.

Be Prepared to Take Whatever Incremental Document Production Is Offered

As discussed in the above materials, do not be particular and prissy about the way document production is performed by your opponent. If the documents seem relevant, make yourself available to review the documents and clip them for copying.

Take the copies that you are given, and use them in the system of organization that you have created. There will be plenty of time for follow-up requests in writing, and for separate jawboning sessions with your opponent.

Of course it would be nice to have documents produced at one time, in one place, and in neat file folders. That is unrealistic. Do not hold up the case and your progress awaiting such perfection.

Depositions

As discussed earlier, this is the highest cost item in litigation, and can easily get out of hand.

Limitations

Our recommendation is that a list initially be developed and then a strict budget made with respect to depositions. While the budget might be deviated from in certain instances if a particular witness was helpful and therefore requires a second or third day of examination, generally the budget should not be moved. This is because every witness will have new things to say that could be pursued. There is no limitation unless a limitation is imposed.

It is also possible to negotiate limitations with the other side. The Government may agree to no more than five or ten depositions per case for each side. You should consider embracing that approach as well.

Videotaped depositions are the rage today - on smaller cases, they are prohibitive from an expense point of view. Indeed, in particular cases it might be possible to get the Government to agree to the parties taping of depositions and then the transcription of only portions of it. Cost savings approaches must be considered at all times.

In Sequence

Depositions should be taken in a particular sequence that has been developed beforehand. The willingness to change the sequence and be flexible is fine. However, move it only for good reason because you will be chasing things and creating additional costs otherwise.

Doing Without

As previously stated, one hard-nosed approach is to work on your own case and to let the other side go its own way in developing its case. Be prepared to present your case at trial and if necessary to skip discovery if it is too expensive to pursue.

Opening Settlement Discussions Without Trial Delay

We have previously discussed the windows that exist for settlement discussions, as well as ADR proceedings. In this section we wish to raise several additional issues, in particular timing considerations.

ADR type meetings, whether they involve the Court, or higher level management positions, should be conducted in a fashion that does not delay the trial process. As many old fashioned trial lawyers will tell you, cases do not get settled until a trial date is set.

One of the things that we try to do is set an early trial date and then back up and leave adequate time for individual actions to take place. The pressure of a trial date causes people to be serious in considering the other parties’ rational offers to resolve cases.

Trial of the Case

People tend to be overly concerned about the trial of Government contract cases. At the Boards of Contract Appeals, trials are relatively informal. The Federal Rules of Evidence are utilized as a guide and not strictly enforced. The Court of Federal Claims approach is similar.

Bench Trials

There are no jury trials; hence there is no need to appeal to the emotions of individuals, but rather to present the facts and the law on a subject.

Short Presentations

Short presentations are generally best for all activities at the trial. Judges are ready to step in and attempt to push things forward and cut off time wasting activities. You should be sensitive to that particular point. Be prepared and be brief.

Cross examination of Witnesses

The cross examination of witnesses at trial should also be brief. You should plan your cross examination well before the trial starts. You will need to make modifications to it as a trial moves forward and as you actually hear the witness, but the cross examination of the witness should largely be prepared before an adverse witness takes the stand.

The important documents of the witness, and the witness’s deposition testimony if taken, should all be annotated, and prepared, along with an outline of the questions to be posed as a minimum.

Opening and Closing Statements

This is one area in which we believe greater length is perhaps appropriate. It is also common to prepare a short pretrial brief to be delivered to the Judge a week or two before the trial.

Opening statements and pretrial briefs are an opportunity to educate the court as to where your case is going, and they allow the court to pay additional attention to the witnesses you are presenting as they testify. Hopefully their testimony is also brief.

What Are the Best Approaches to Audit, Negotiation, Settlements and Litigation with Regards to Government Claims?

Dealing with Auditors

As noted above, claims are typically audited by a Government audit agency. Their findings can be highly significant in resolving claims through negotiation, or, if necessary, through litigation.

Many contractors correctly believe that the Government audit agency should audit the contractor’s costs, and render an opinion as to whether the costs were incurred.

At the federal level, however, most audit agencies comment extensively on the merits of the contractor’s claim for entitlement. This approach to auditing can present problems for the contractor and for agency contracting officials.

Thus, an intelligent and experienced contractor or Contracting Officer must anticipate and prepare to inform the auditor about issues of entitlement (i.e. the causes and facts surrounding the generation of  costs).

The failure to do so can have adverse consequences. A tension exists between procurement contracting officials, who must deal with the contractor and resolve the contractor’s claims, and the audit agency functions that often have no further contact with the contractor, and who often believe they are charged with saving the “taxpayer” money.

These “savings” are not based on the amount ultimately refunded to the Government or paid to the contractor, but on the amounts initially disallowed. A Contracting Officer that wants to settle a claim will face an obstacle if the auditors “disallow” all or most of the costs.

The obstacle can become insurmountable if the auditor believes the costs claimed contain false statements and refers it to an investigative agency, rightly or wrongly.

Therefore, a contractor should not permit the audit to go forward until the auditor has read the contractor’s entitlement volume. One way to insure that this happens is to provide the auditors with the volumes of the claim that relate to factual and entitlement issues, and withhold the cost volume until they have reviewed all of the materials provided on entitlement before they start the audit.

We have seen far too many disputes and negative audit reports that could easily have been avoided had the contractor taken the time to make the audit agency understand the factual setting from which the costs arose.

In terms of cooperation with the auditor and assisting them in doing their job, a professional approach is required. Put the auditor in an area where he or she has adequate room to work. This is common courtesy.

Give the auditor the necessary materials they need to evaluate the claim. Keep a record of the data the auditor has been given. Keep copies of any records that the auditor copies.

Most importantly, assign a relatively senior individual to be the auditor’s contact. This should be a person who understands the claims and the facts supporting them, as well as how the company operates, including its cost accumulation systems.

This person should meet with the auditor at least twice each day, once during the start of the day and again at the end of each day to make sure that the auditor has satisfactory documentation to perform the audit, and to correct any misimpressions or incorrect information.

If the auditor needs more financial data or answers to questions, the knowledgeable individual should be in a position to get that data without a lot of corporate red tape.

Negotiations with the Procuring Agency

The initial Government decision-maker is the Contracting Officer.   To enhance the chance of recovery, the Contracting Officer should receive a candid, unemotional presentation of the facts supporting the contractor’s claims, i.e. the narrative portion of the claim and a quantification of it.

Invective accusations in claim documents are almost always counterproductive. In addition, common courtesy in dealing with the Contracting Officer, even if he or she is not particularly courteous to the contractor, is the best and often the most productive approach.

Here are some general guidelines to help prepare for later negotiations:

• Claims should not be a surprise. Tell the Contracting Officer orally what you are doing and what your claim submission schedule is. If appropriate, put  that schedule in writing.

• Answer all of the Contracting Officer’s questions promptly and in writing. If you do not answer the Contracting Officer’s letters for several months, how can you expect timely actions from the Government?

• Impress upon the Contracting Officer that prompt resolution of the claim is required.

• Remind the Contracting Officer that the CDA requires a decision on claims within 60 days, or a written reasonable schedule for a decision on more complex claims.

• If additional information or data is requested, provide it promptly unless it is unduly burdensome. Remember that some or all of this information will have to be produced if the matter is not settled amicably.

• Dealing with the Contracting Officer is no different than any other negotiation. Keep the matter current, respond to questions, and press for prompt negotiations. Be prepared to put in the necessary time to stay in session at negotiations to resolve matters. There will likely be a number of sessions.

Dealing with Senior Level Agency Officials

“The Contracting Officer is often less able to overrule using activities, technical personnel, and auditors who have their own agendas. Therefore, there are times when some senior level assistance in resolving claims is actually welcomed.”

A contractor cannot allow a major claim that seriously affects the company’s financial future to result in a “no entitlement determination” by the Contracting Officer. If all the contractor hears through the negotiation process are negatives, the contractor must do something to protect itself short of litigation.

The contractor must have a plan for attempting to resolve the claim with senior level agency officials. Going to a level above the Contracting Officer to see if a claim can be resolved is neither inappropriate nor wrong.

Sometimes, these officials have a different agenda and may be willing to become involved in claims resolution. For example, it is not uncommon for an agency to have computer listings of unresolved contractual actions that are receiving consideration in order to close them out. These listings put pressure on senior level agency officials to resolve claims.

The Contracting Officer’s superiors and the agency head may also have a policy of making sure that all claims capable of being resolved are being resolved regardless of the internal opposition at the working level. The Contracting Officer is often less able to overrule using activities, technical personnel, and auditors who have their own agendas. Therefore, there are times when some senior level assistance in resolving claims is actually welcomed.

Disclose your intent to approach senior level officials to the Contracting Officer in an upfront, non-confrontational, courteous, and professional fashion:

• Call the Contracting Officer and tell them that you cannot accept a negative decision on the claim or an extended delay because it is so important to your company financially.

• Tell the Contracting Officer who you expect to see and what type of documents that you are going to present at senior levels in the agency.

• Tell the Contracting Officer the time and place of meetings that you would like to arrange, and ask for his or her assistance in arranging those meetings.  Show  the Contracting Officer the documents you are going to submit before they are actually presented at senior agency levels.

• Remember that the Contracting Officer is going to be asked for an opinion. You want to have that person remain at least neutral if at all possible.

• In most situations, invite the Contracting Officer to the meetings you want to schedule with senior level officials.

• When making your presentation to senior level agency officials, if you cannot write out in several pages what you are seeking and if you cannot make your presentation in 5 to 10 minutes, something is wrong and you are not going to succeed.

Utilizing Congressional Representatives in Negotiations

Agencies must be aware that contractors will at times utilize their elected representatives to complain about contract actions that are taking place or not taking place. This is particularly true in the claims area when settlements are not proceeding at the rate expected.

There is absolutely nothing wrong with a contractor complaining to its elected representatives about the claims process in a particular agency, and there is nothing wrong with the legislator inquiring about what is happening and asking for an explanation. The contractor has the constitutional right to do so under the First Amendment.

The gray area is how far the Congressman or legislator can go in pressing the particular agency for action. As the legislator’s stature increases, because of their position in the House or Senate or membership on a committee that has oversight of an agency’s budget, the appearance of improper pressure by a contractor on an agency can increase.

Based upon the authors’ long-term observation in this area, it is recommended that an agency proceed in the appropriate fashion in evaluating and appraising the contractor’s claims.

A Congressional request often will get some priority—that is why the contractor is seeking Congressional assistance. However, performing  other normally accepted activity with the contractor’s claims can create appearance problems for the agency and the individuals involved.

We have observed congressional hearings that were caused by exactly that — the apparently special and unjustified treatment given to particular contractors and their claims.

“There is absolutely nothing wrong with a contractor complaining to its elected representatives about the claims process in a particular agency, and there is nothing wrong with the legislator inquiring about what is happening and asking for an explanation. The contractor has the constitutional right to do so under the First Amendment.”

A contractor should not be looking for special treatment. Pressure  to decide issues promptly, inquiry into what is going on, the request for reports as to how analysis is taking place, and the arrangement of meetings between the parties, are all proper areas for Congressional oversight. Pressure for special treatment is not.

Litigation

Litigation is a last resort. Litigation is so expensive and time consuming that a contractor should attempt to use every reasonable means to see if a settlement can be arrived at with the Contracting Officer, or, if necessary, through meetings with senior agency officials, as discussed above.

If all reasonable possibilities of settlement with the Contracting Officer exhausted, what is the point in continuing to waste time? It is time to have a fresh look taken of your claim. Indeed, once the Contracting Officer issues a final decision, it will be forever binding unless a timely appeal is filed with a Board of Contract Appeals or the Court of Federal Claims.

Remember that litigation is not a decision to forgo settlement. In fact, most civil cases settle. A clear and present threat to litigate is a powerful means to achieve a fair settlement.

A Fresh Look from Agency or DOJ Counsel

Often the agency attorney assigned to the case, or the  Department of Justice (“DOJ”) attorney in a case at the Court of Federal Claims, has a different perspective on a claim than the Contracting Officer, and will take a fresh look at the claim.

If the contractor’s claim positions are correct, it is not uncommon for litigation counsel to want to settle rather than to spend their time and effort litigating a losing cause.

White Papers

Document discovery normally starts within 30 to 60 days of filing an appeal. Documents take on major significance in litigation because they do not change, and are not subject to risks inherent in live testimony. Judges rely on documents.

Once you have all of the documents, both sides are in a position to develop their stories based upon those documents. Since the documentary will not change, there is usually little motivation in “hiding” the story from the other side, particularly if it helps your case.

Litigation counsel are often so busy that they have little time to focus on the case until it has proceeded into depositions. It is often effective in seeking a settlement, particularly before depositions have taken place, to prepare a “white paper” illustrating those documents that are damaging to the Government’s position.

Depositions, Trial and Appeal

During depositions, the parties and their counsel have the chance to assess witnesses, and to better understand the other side’s positions. Sometimes, this greater level of understanding will enable one or both parties to press for settlement.

The next settlement opportunity is on the “courthouse steps” or during the trial. Often, this is when the risks become apparent to even those who have been in denial.

The final stage for resolution occurs after trial. We have seen cases settle because of the time, expense, and risk of an appeal. Since cases that settle prior to appeal have no value as precedent, the DOJ may be willing to settle a case at that time. This is especially true when a loss on appeal has the potential to impact other pending cases.

Does One Go to the Court of Federal Claims or the Board of Contract Appeals?

Jurisdiction

This is an issue that contractors and their attorney’s constantly debate. The CDA provides that both the Board and the Court of Federal Claims (“CFC”) have the same jurisdiction over most issues.

There are some types of cases that Boards cannot decide as a  result of its historical development and special statutes. See e.g.: Coastal Corp. v. United States, 713 F.2d 728 (Fed. Cir. 1983)(Board cannot hear claims for bid and proposal costs); United Technologies Corp., ASBCA Nos. 46880 et al., 95-2 BCA ¶27,698 (no jurisdiction over criminal fraud or civil fraud).

Indeed, one of the major issues in this area is whether the Board must stay a proceeding in which the Government has alleged fraud. In that circumstance, the Government has the burden of showing that there are:

. . .substantially similar issues, facts and witnesses in civil and criminal proceedings, and there is a need to protect the criminal litigation which overrides any injury to the parties by staying the civil litigation. See Afro-Lecon, Inc. v. United States, 820 F.2d 1198 (Fed. Cir. 1987); Nexus Const. Co. Inc., ASBCA No. 51004, 98-1 BCA ¶29,375.” [T. Iida Contracting, Ltd., ASBCA No. 51,865, 2000-1 BCA ¶30,626]

The CFC will entertain claims for bid and proposal costs under the Tucker Act. The CFC will also hear Government counterclaims based on the Forfeiture Statute, 28 U.S.C. § 2514 and the False Claims Act (“FCA”).

See: Joseph Morton Co. v. United States, 757 F.2d 1273 (Fed. Cir. 1985); K & R Engineering Co., Inc. v. United States, 616 F.2d 469 (Ct. Cl. 1980) (conflict of interest under 18 U.S.C. §208(a) barred recovery); Crane Helicopter Services, Inc. v. United States, 45 Fed. Cl. 410 (Fed. Cl. 1999).

Factors in Making The Election

Time for Decision

The first consideration is the time to resolve the case. The CFC has a somewhat more manageable workload and tends to move its caseload forward much more aggressively than the Boards. It is possible to get a fairly substantial case through discovery and to trial at the CFC within 12  to 18 months of filing.

Some CFC Judges will decide the case from the bench, and follow up with a written ruling. Rulings tend to come promptly.

Counsel

The Department of Justice (“DOJ”), Commercial Litigation Branch, handles cases in the CFC. While some practitioners believe that to be a negative because DOJ often takes a formalistic approach to various issues, at the same time DOJ is independent from the agency “client” that was originally involved in generating what is now the current claim.

In certain instances, DOJ will force an agency to pay a meritorious claim rather than force the contractor to litigate it to the very end, particularly a small business that can recover Equal Access to Justice Attorney fees.

Discovery

Some lawyers also contend that the Boards are not as forceful in requiring that discovery be provided to contractors. Further, the Court  can enforce its own subpoenas.

Expertise

Board Judges are required to have 5 years of Government contracting experience. Such expertise can be extremely helpful in complex cases. However, this experience typically comes in working for the Government, sometimes for the same agency.

The President nominates CFC Judges. Although Government contract expertise is not required, the lack of familiarity sometimes enables them to take a fresh look at the law.

Case Precedent

Both the Boards and Court are bound by decisions of the Federal Circuit. However, the Board, and to a lesser degree the CFC, are either bound or give deference to their own precedents.

Some of these precedents reflect differences that should be taken into account in making an election to either the Court or the Board.

While practitioners argue about whether the law at the Board or the CFC is more favorable to the contractor on a particular issue, there are several areas where some rough predictions can be made.

In the defective pricing area, the CFC, for whatever reason, has almost never decided a case in the contractor’s favor.

In the default termination area, some lawyers feel the Boards have become very liberal and relaxed in terms of upholding Government default terminations. The CFC is supposedly more rigorous in holding the Government to a stricter standard.

Timing

Sometimes the choice is based on timeliness alone. Appeals at the Board must be filed within 90 days, whereas the CFC will accept appeals brought within 1 year of the CO’s final decision.