CLAIMS AND DISPUTES
- What is a claim?
- What are the COR's responsibilities in the case of a claim?
- What is the Contract Disputes Act of 1978?
- How does a contractor notify the government when it has a problem that could result in an equitable adjustment or a claim, and how does the government respond to this notification?
What is a claim?
The government and the contractor sometimes have disagreements regarding the terms of the contract or the manner of performance of the contract work. Usually, the parties can resolve their differences through informal discussion. However, in instances where this informal resolution is not possible, it becomes necessary to litigate unresolved issuesone party may file a claim against the other. Either the government or the contractor can file a claim. A claim is a written demand by one of the contracting parties seeking:
Payment of a certain amount of money
Adjustment or interpretation of contract terms
Other relief arising under or relating to the contract.
A claim can:
Arise under a contract, meaning that it is directly associated with that contract (i.e., the contract itself provides a remedy for the claim)
Relate to a contract, meaning that is indirectly associated with that contract (i.e., the contract itself does not provide a remedy for the claim).
A claim under a contract can be resolved with a contract clause that provides for the relief sought by the claimant. However, a written demand by the contractor seeking payment exceeding $100,000 is not a valid claim under the Contract Disputes Act until it is certified in writing.
A voucher, invoice, or other routine request for payment that is not in dispute when submitted is not a claim. The submission may be converted to a claim through a written notice to the CO if it is not acted upon in a reasonable time by the government, if the monetary amount being requested is in dispute, or if there is disagreement between the government and the contractor regarding which party is liable for the payment request.
What are the COR's responsibilities in the case of a claim?
The COR assists the CO in analyzing the claim, recommending a settlement position, and participating in the resolution process.
The COR is often the individual responsible for analyzing the claim and recommending the settlement position to the CO.
The COR will need to perform the following tasks when faced with a dispute:
1. Notify the CO of potential disputes
2. Assist the CO in resolving disputes
3. Assist the CO in processing formal claims.
The COR must be sure that:
Information is provided to the CO so that he or she may correctly determine the validity of the claim
He or she prepares a proper and complete report of the technical or performance aspects of the dispute that fully supports the CO's contractual determination
The government's interests are protected, and the contractor is treated fairly and equitably within the terms of the contract.
The government's policy is to try to resolve all contractual issues to the maximum extent practicable. This policy includes:
The use of alternative dispute resolution (ADR) procedures, if permitted and appropriate
The exercise of all reasonable efforts to resolve controversies prior to the submission of a claim
The inclusion of clauses or other terms and conditions in the government contract that protect the public's interest for any contract disputes/claims.
What is the Contract Disputes Act of 1978?
The Contract Disputes Act (CDA), as amended, establishes procedures and requirements for asserting and resolving claims by or against contractors arising under or relating to a contract subject to the act. The act requires that the dispute procedures listed be used by all federal agencies.
How does a contractor notify the government when it has a problem that could result in an equitable adjustment or a claim, and how does the government respond to this notification?
When a contractor has a problem performing the contract work, he or she usually contacts the CO or the COR by phone to inform them that a problem has arisen. This initial contact is not a claim. The government usually responds to the contractor's phone call with a letter, asking that the problem be stated in writing. The contractor will then respond with a letter describing the problem. The contractor's letter might be more than a simple notice that there is a problem. It could request an equitable adjustment to resolve the problem informally, or it could represent a claim that could result in litigation. Usually, at this early stage, the contractor does not know how severe the problem will be, what will be required to correct it, or how much a solution will cost. Without this information, it is too early to proceed with a request for equitable adjustment or a claim.
At this point, the COR must investigate the problem and assist the CO in determining whether the contractor is due more money, time, or both, and if so, how much more.
In the meantime, the contractor will investigate the problem, determine exactly what the problem is, and specify what is needed to resolve it. The contractor will probably send a written request for the CO to make an equitable adjustment to the contract to correct the problem; the government will then agree to pay added costs, adjust the delivery schedule, or provide any other considerations that it deems appropriate. Most of the time, the government will comply with the contractor's request, make the equitable adjustment, and modify the contract to effect the change.
However, there are instances in which the contractor and the government cannot agree, and the contractor decides to file a formal claim demanding that the CO make a final decision. The CO has the authority to make the final decision for the government, either granting the contractor its claim or denying it. Whatever the decision, the CO must issue a formal final decision to resolve the claim. A CO's final decision denying the contractor's claim entitles the contractor to file an appeal to a board of contract appeals or the Court of Federal Claims.
Sometimes, determining whether a notice sent by a contractor is an actual claim can be difficultthe notice may only be a simple notification of a problem, or it could be a request for equitable adjustment that can be resolved informally. Unfortunately, there are no criteria that can be applied in every instance to reach a failsafe decision on whether or not a notice is really a claim. If a COR receives a letter from a contractor in which the contractor's intentions are not made clear, the COR should:
Initiate discussion of the problem with the contractor to gather information about the contractor's perception of the problem
Informally attempt to determine what sort of resolution the contractor is seeking
Talk to someone who may have dealt previously with the problem
Join the CO in consulting with legal counsel, if necessary
If considered necessary based on the particular circumstances and with the CO's concurrence, write a letter to the contractor asking if a claim is being submitted.