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STRATEGIES FOR SEEKING COMPENSATION:

THE FUNDAMENTALS OF REAS & CLAIMS

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MARIA L. PANICHELLI, ESQUIRE

MARCH 16, 2017

STRATEGIES FOR SEEKING

COMPENSATION:

THE FUNDAMENTALS OF REAS & CLAIMS

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MARIA L. PANICHELLI, ESQUIRE

MARCH 16, 2017

STRATEGIES FOR SEEKING

COMPENSATION:

THE FUNDAMENTALS OF REAS & CLAIMS

7

MEET THE PRESENTER

Maria L. Panichelli | Partner

Federal Contracting Attorney

Cohen Seglias Pallas Greenhall & Furman PC

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Requests for Equitable

Adjustment & CDA Claims:

A Primer

9

REQUESTS FOR EQUITABLE

ADJUSTMENT

Request for Equitable Adjustment (“REA”):

Is a request for compensation

Either for time, money or both

Based on a change to the contract arising during

project performance

Examples:

‒ Differing Site Condition

‒ Defective Specification

‒ Change(s) (Constructive or Express)

‒ Suspension of Work

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REAs lack the formality of claims

Filed during project performance

Generally considered a creature of “contract

administration” as opposed to “litigation”

Involves (theoretically) “negotiations”

REA FUNDAMENTALS

11

REA FUNDAMENTALS

Time for Submittal:

Best practices is to submit within 30 days of

change/dispute that gave rise to the REA

Failure to do so will not necessarily bar the

REA unless there was prejudice to the

Government

12

REA FUNDAMENTALS

Format:

No specific format required

Typically takes the form of a letter to the Contracting

Officer with any relevant exhibits, such as:

‒ Cost information

‒ Correspondence between contractor and Government

‒ Schedule updates

‒ Change orders

‒ Any other relevant information for the Government to

consider

The more detail, the better your chance of success

13

REA FUNDAMENTALS

Certification:

Generally, REAs do not need to be certified

Exception:

‒ Department of Defense contracts where the

value exceeds $150,000 (the simplified

acquisition threshold) required certification

14

REA FUNDAMENTALS

Certification:

Certification Language: “I certify that the request

is make in good faith, and that the supporting data

are accurate and complete to the best of my

knowledge and belief.”

DFARS 243.204-71 and 252.243-7002

15

REA FUNDAMENTALS

Costs:

Preparation costs are recoverable

This includes legal and accounting fees, and

internal costs

16

CLAIMS

A Claim:

Filed pursuant to the Contract Disputes Act

(“CDA”), 41 USC 701 et seq.

Is a formal written request demanding

payment/the adjustment of a contract price or

interpretation of a contractual term, or seeking

other relief pursuant to or relating to a contract

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CLAIM FUNDAMENTALS

Claims are more formal than REAs

No longer a creature of “contract administration,”

rather it constitutes the first phase of “litigation” –

leads to litigation before a Board of Contract

Appeals or Court of Federal Claims

No longer a negotiation, positions are fixed

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CLAIM FUNDAMENTALS

Time for Submittal:

Must be filed within 6 years of claim accrual

Contractor must provide Contracting Officer

with notice of a claim prior to final payment on

the contract

Best Practices is to file a claim within 30 days

of cancellation of a stop-work order

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CLAIM FUNDAMENTALS

Format:

No specific format required

Typically takes the form of a letter to the Contracting

Officer with any relevant exhibits, such as:

‒ Cost information

‒ Correspondence between contractor and Government

‒ Schedule updates

‒ Change orders

‒ Any other relevant information for the Government to

consider

The more detail, the better your chance of success

20

CLAIM FUNDAMENTALS

Format:

Claim must include a clear and unequivocal

written statement that puts the Contracting

Officer on notice of the basis and amount of a

claim

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CLAIM FUNDAMENTALS

Certification:

Claims over $100,000 need to be certified

Certification language: “I certify that the claim is

made in good faith; that the supporting data are

accurate and complete to the best of my knowledge

and belief; that the amount accurately reflects the

contract adjustment for which the contractor believes

the Government is liable; and that I am duly

authorized to certify the claim on behalf of the

contractor.” 48 CFR 33.207

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CLAIM FUNDAMENTALS

Certification:

Defective certification can be corrected, but

this causes delay to the claim process; not

recommended

What about subcontractor claims?

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CLAIM FUNDAMENTALS

Costs:

Preparation costs are NOT recoverable

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REAS V. CLAIMS:WHAT TO FILE WHEN

Informal v. Formal

Cooperative Relationship with CO v. Combative

Relationship with CO

Negotiations, Discussions v. Adversarial, Litigation

Statute of Limitations?

Costs Recoverable v. Costs Not Recoverable

Privilege Issues?

25

REAS V. CLAIMS:PRACTICAL CONSIDERATIONS

When to File an REA:

When a contractor has a good working

relationship with the Contracting Officer

When the agency had indicated they would be

willing to negotiate a change/dispute with the

contractor

When a contractor is attempting to show its

willingness to negotiate

26

REAS V. CLAIMS:PRACTICAL CONSIDERATIONS

When to File a Claim:

When the contractor and Contracting Officer do not have a

good working relationship, or when there is an

antagonistic or adversarial relationship

When it is clear that the Contracting Officer is not willing to

negotiate a change/dispute, or when the Government has

already stated that it does not believe the contractor is

entitled to an equitable adjustment

When the Statute of Limitations is about to run out

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REAS V. CLAIMS:PRACTICAL CONSIDERATIONS

Keep in Mind:

An REA can later be converted into a Claim

The filing of an REA does not preclude you

from later filing a Claim, in fact, it is quite

common to file both

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REAS AND CLAIMS:COMMON ISSUES

Some of the most common issues leading to

REAs or Claims:

Differing Site Conditions (FAR 52.236-2)

Changes (Fixed Price) (FAR 52.243-1)

Changes to Prevailing Wages (FAR 52.222-43)

Variations in Estimated Quantity (FAR 52.211-18)

Stop Work Order (FAR 52.212-13)

Suspension of Work (52.242-14)

Terminations

Damages Associated with Punitive Punch List

Delays

29

REAS AND CLAIMS:COMMON ISSUES

What about :

Good Faith and Fair Dealing, Duty to

Cooperate

Declaratory Judgments (KT)

30

REAS AND CLAIMS:COMMON ISSUES

What about :

Good Faith and Fair Dealing, Duty to

Cooperate

Declaratory Judgments (KT)

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REAS AND CLAIMS:

Government’s duty to cooperate:

To carry out its duties under the contract in good faith

To not hinder the contractor’s ability to perform under the contract

To not deprive the other party of the benefit of the contract

The duty not to hinder and the duty to cooperate are

aspects of the implied duty of good faith and fair dealing

The duty of good faith and fair dealing is limited by the original contract

Bad faith is not an essential element of a breach of the implied duty of good

faith and fair dealing

32

REAS AND CLAIMS:

What type of relief is available? A

contractor is entitled to:

Costs

Additional Time (Relation to LDs?)

Reasonable Profit (sometimes)

33

Subcontractor’s

“Pass Through” Claims

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SUBCONTRACTOR

“PASS THROUGH” CLAIMS

Sovereign Immunity – General rule is that

lawsuits against the Federal Government are

prohibited

Tucker Act creates an exception to sovereign

immunity: suits may arise out of express or

implied contracts to which the government was a

party

35

SUBCONTRACTOR

“PASS THROUGH” CLAIMS

To take advantage of this exception, there must be an

express or implied contract with the Government

Because subcontractors have no “privity of contract” they

can not file claims against the government on their own

behalf -- subcontractors’ claims must be “sponsored” by

their prime contractors

Commonly called a “pass-through” claim

Prime must clearly and affirmatively agree to sponsor the

subcontractor claim

Certification issues?

36

SUBCONTRACTOR

“PASS THROUGH” CLAIMS

Subcontracts should address how these will be dealt

with:

Disputes clause – distinction between claims between

subcontractor and prime, and disputes against owner

Should delineate each party’s responsibility with

regard to pass-through claims, i.e.:

‒ Prime agrees to sponsor

‒ Subcontractor agrees to cooperate fully

Appeal of Binghamton Simulator Company, ASBCA

No. 59117 (2014)

37

SUBCONTRACTOR

“PASS THROUGH” CLAIMS

Addressing it in the subcontract is not always enough. Always

a good idea to have a Liquidating, or Pass-Through, Agreement

In these, the prime contractor agrees to “sponsor” the

subcontractor’s claim against the Government

Commonly, in a Liquidation Agreement, the subcontractor

agrees to release the prime contractor in exchange for

the prime’s promise to:

‒ Prosecute the subcontractor’s claim against the

government; and

‒ Pay the subcontractor some or all of the money

recovered from the Government in connection with that

claim

38

SUBCONTRACTOR

“PASS THROUGH” CLAIMS

When agreeing to pass through a subcontractor’s

claim, a prime should keep in mind the Severin

Doctrine and the exceptions thereto.

39

Other Types of Claims

Common in Federal

Contracting

40

Sub v. Prime Claims

Miller Act Claims

QUESTIONS?

41

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44

CONTACT INFORMATION

Maria L. Panichelli | Partner

Cohen Seglias Pallas Greenhall & Furman PC

215.564.1700

mpanichelli@cohenseglias.com

@MariaPanichelli

www.linkedin.com/in/mariapanichelli