Government Contracts & Investigations

No Magic Words Required…Contractor Avoids Dismissal of “Claim” Despite No Specific Request for Contracting Officer “Final Decision”

By | August 5, 2019

In Hejran Hejrat Co. LTD, v. United States Army Corps of Engineers, No. 2018-2206, 2019 WL 3210172 (Fed. Cir. July 17, 2019), the United States Court of Appeals for the Federal Circuit reversed an Armed Services Board of Contract Appeals (“ASBCA”) decision dismissing the contractor’s claim for lack of jurisdiction.  The ASBCA based its dismissal on its finding that the contractor, Herjan Hejrat Co. LTD (“HH”), had failed to expressly request a final decision from the contracting officer in its requests for equitable adjustment. The contract related to transportation services provided to the United States Army Corps of Engineers (“USACE”). Following the expiration of the contract, HH, requested additional compensation from the USACE arising from alleged violations of the contract: suspension of work, changes to the contract requirements and termination of the original contract.

After the parties had engaged in some preliminary discussions, HH submitted a “Request for Equitable Adjustment” (“REA”) seeking $4,137,964 in additional compensation. The REA included a sworn statement from HH’s Deputy Management Director who possessed “full management [authority]” to close out the contract and specifically included a statement indicating it should be “treated as a[n] REA.” Shortly thereafter, the contracting officer denied HH’s request in what was characterized as the “Government’s final determination in this matter.” (emphasis added). HH ultimately appealed the contracting officer’s decision to the ASBCA, but the Board dismissed the action finding “at no point, in six years of communication with the [USACE did HH] request[] a contracting officer’s final decision.”

On appeal, the Federal Circuit reversed the dismissal, finding the submitted REA was sufficient to constitute a valid claim under the Contract Disputes Act (“CDA”). First, the Federal Circuit noted that an REA can constitute a claim under the CDA so long as it complies with the requirements set forth in FAR 52.233-1. Second, the Federal Circuit found that the submitted REA sufficiently requested “a final decision” from the contracting officer. The Federal Circuit noted: (1) HH “requested that the contracting officer provide specific amounts of compensation for each of the alleged grounds,” and (2) that HH provided a sworn statement attesting to the truth of the REA and included detailed support for its alleged losses and claimed a sum certain in compensation. Based on these facts, the Federal Circuit found that the REA:

[bore] all of the hallmarks of a request for a final decision on a claim . . . and [that the court would be] loathe to believe that in this case a reasonable contractor would submit to the contracting officer a letter containing a payment request after a dispute had arisen solely for the contracting officer’s information and without at the very least an implied request that the contracting officer make a decision as to entitlement. Any other finding offends logic.

The Federal Circuit was also persuaded that HH certified the REA, which it noted triggered potential fraudulent claim liability and was designed to “discourage” the submissions of “unwarranted claims.” Finally, the Appeals Court also relied on the contracting officer’s characterization of the denial as a “final determination” in reaching its decision. Based on the foregoing, the Federal Circuit reversed the dismissal and remanded HH’s claim to move forward before the ASBCA.

While the contractor was successful in reversing the dismissal of its claim here, it spent a significant amount of money winning that fight. The most efficient and cost-effective way to avoid facing these types of issues is for contractors to ensure that any submission they intend to rely upon as a “claim” under the CDA strictly complies with FAR 52.233-1(c) and specifically requests the contracting officer to render a final decision on the claim.

Contact Roddy Stieger for more information.