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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
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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
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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
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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
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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
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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
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REA FUNDAMENTALS
Costs:
Preparation costs are recoverable
This includes legal and accounting fees, and
internal costs
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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
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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?
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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
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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
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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: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
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REAS AND CLAIMS:
What type of relief is available? A
contractor is entitled to:
Costs
Additional Time (Relation to LDs?)
Reasonable Profit (sometimes)
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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?
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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)
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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.
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Other Types of Claims
Common in Federal
Contracting
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Sub v. Prime Claims
Miller Act Claims
QUESTIONS?
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Thank You For Participating
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CONTACT INFORMATION
Maria L. Panichelli | Partner
Cohen Seglias Pallas Greenhall & Furman PC
215.564.1700
@MariaPanichelli
www.linkedin.com/in/mariapanichelli