The COVID-19 Pandemic wreaked havoc on many businesses. For others, though, it created new opportunities to sell to the federal government, including an unprecedented demand for personal protective equipment (“PPE”), COVID tests, and vaccines. Perhaps your company found itself as a first-time government contractor, or you started selling products to the government that you had never sold before. If your government contract went smoothly, congratulations! If not, you may be left wondering who will pay for unexpected increased costs of performance, or how you can defend against the government’s claims to recoup overpayments or liquidated damages.
Claims by and against government purchasing agencies are governed by the Federal Acquisition Regulation (“FAR”), and specific rules and deadlines apply. If you find yourself in a dispute with your government customer, there are a number of steps you can take to protect yourself. Most importantly, you should keep detailed records of everything related to the dispute, and engage counsel early to maximize your chance of success in the claim process.
Example Claims
There are many situations that can impact your contract performance and obligate the government to change your contract terms or price. Here are a few hypotheticals to consider:
- The government ordered 50,000 surgical gowns from your company to be delivered in 90 days. On day 30, the government asked you to accelerate performance and deliver by day 60. Your costs of performance increased, but the government only paid you the original contract price.
- You contracted with the government to provide N95 face masks, but your supplier could only obtain KN95 face masks. The government accepted the substitution, but withheld partial payment based on the differing product quality. You disagree with the amount of payment the government withheld.
- The government contracted with you for medical personnel services to provide COVID-19 vaccine administration at community care clinics. While on site, the contracting officer asks some of your personnel to run COVID-19 testing when vaccine appointments are slow. Your contract does not provide for this additional service.
In each of these hypotheticals, the government may owe the contractor additional payments on their contracts. If you believe the government owes you money or an adjustment to the terms of your contract—e.g., an extension of time to deliver products or a waiver of a product’s quality standard—you have a few options. The first step is talking to your contracting officer. If your contracting officer agrees there are circumstances warranting an adjustment to your contract, you may be able to work out a deal without invoking the formal disputes process (just make sure you get the deal in writing). Your contracting officer may ask you to submit a Request for Equitable Adjustment (“REA”) setting out why you are entitled to an adjustment to the contract price or terms. If your contracting officer denies the REA, you are left with one more option: asserting a “Claim.”
Claim Requirements
The FAR is very specific about what must be in a contractor’s Claim for a payment of money:
- It must be in writing;
- It must contain specific certification language by the contractor, executed by a person authorized to bind the contractor;
- It must demand a sum certain;
- It must seek a final decision by the contracting officer.[1]
Claims for the adjustment of contract terms are a little different but still require careful drafting. Simply sending the government an invoice does not constitute a formal Claim. Nor does an REA typically satisfy the criteria of a Claim. It is important to get the technicalities right because it could determine your ability to recover.
Timing
Timing is also important. You have six years to submit a Claim to the government after the cause of action accrues. That sounds like a lot of time, but it can take months to pull together information and documentation to support the Claim, and records can be lost over time through accidental deletion, file corruption, and poor organization. Further, the six years is not tolled during contract performance.
Appeals from Denied Claims
Once you submit your Claim, the contracting officer has 60 days to issue a final decision, or to give you a reasonable date by which you can expect a decision. If the contracting officer fails to meet the deadline, it is called a “deemed denial.” If your Claim is expressly denied or deemed denied, you may choose to appeal that decision—essentially entering litigation—in one of two forums: the agency board of contract appeals or the U.S. Court of Federal Claims. You only have 90 days from the final decision to file at the boards of contract appeals. The U.S. Court of Federal Claims allows one year to file. Thus, it is wise to engage counsel as soon as possible in the Claim process so you can make an informed choice of whether and where to file an appeal, should it come to that.
No company enters into a government contract assuming there will be a dispute, but it is important to protect your company in the event one arises. Good recordkeeping is the most powerful tool in your toolbox. Document, document, document! Keeping detailed records of your costs, performance issues, and communications with the contracting officer is the key to success when trying to recover from the government or defending against government claims. Expert legal counsel is also crucial in responding to government claims or submitting your own claims against the government, and may help you resolve claims without litigation.
FOOTNOTES
[1] FAR 52.233-1.