Rights of Contractors in Government Contract Disputes

 

RIGHTS OF CONTRACTORS IN GOVERNMENT CONTRACT DISPUTES

Many companies – particularly in the northern Virginia and Hampton Roads areas of the Commonwealth – provide support to federal government agencies.  If your company is one of these, do you know what to do in the event there is a dispute – how to you prepare in advance and how do you proceed after a dispute arises?
Like everything with federal government contracting, disputes are governed by federal statutes.      
In 1978, the Contract Disputes Act (“CDA”) was enacted to set forth procedures to  deal with disputes.  This CDA process applies to all disputes arising under or relating to a government contract.  A federal contractor that has a dispute must follow the CDA's mandated procedures carefully or it risks losing its rights against the government agency. The CDA adopts a standard “disputes” clause, which defines the rights and duties of a contractor in dispute with the government. One of the important provisions in the CDA requires the contractor to continue performance pending resolution of a dispute.
The following dispute process is a general guideline for federal government disputes.  

A. Initiating "Claims"

A contractor initiates the disputes process by presenting a “claim” to the contracting officer (“CO”).  A claim is “a written demand or written assertion by one of the contracting parties” seeking . . . relief under the contract.”  If your company is a subcontractor to the Prime contractor, you are not “one of the contracting parties” to the government’s contract and, accordingly, you must rely on the prime contractor to preserve your rights and seek your damages unless your subcontract with the prime contractor has language to preserve some of your rights.  

B. Contracting Officer's Decision

If the contractor and government are unable to negotiate a resolution to the dispute, the CO must issue a “final decision,” which is the government agency's position regarding the claim. After the CO issues such a decision, or if the CO fails to provide a final decision after a period of time, the contractor may appeal the the claim to an administrative board of contract appeals (“BCA”) or the U.S. Court of Federal Claims (“COFC”).

C. Appeal to Board of Contract Appeals

There are eleven agency BCAs, which have been established to hear and decide contract disputes between government contractors and agencies under the rules and regulations of the CDA.
A contractor initiates an appeal to the appropriate BCA by filing a “Notice of Appeal” within ninety days of receipt of the CO's final decision. TFailure to file within this 90 day period, waives its right to proceed. The Notice of Appeal is usually a simple letter or BCA form stating the date of the CO final decision, the contract number, and that the contractor is appealing the CO's final decision.
The applicable BCA will then inform the parties that the case has been “docketed.”  Under the standard BCA rules, the contractor must file a complaint within thirty days of the docketing notice. The government then has thirty days to file its answer.
Proceedings at the BCAs are somewhat less formal than in most courts. The BCA's administrative judge generally follows the federal rules applicable to federal courts in making procedural and evidentiary decisions. Discovery is available in much the same fashion as in cases before federal district courts or the COFC.
After the complaint and answer have been filed and the discovery has occurred, a hearing will be held.  Post-hearing briefs are filed by the respective parties and the decisions of the BCA are rendered by a three-judge panel.  The BCA's decision may be appealed to the Federal Circuit Court of Appeals. 
If your company is a subcontractor, you will not be a party to the BCA proceeding, but may be called upon as a witness and in the discovery and hearing. This involvement may be critical to the decision rendered by the three-judge panel.

D. Appeal to U.S. Court of Federal Claims

Another path for the contractor is to initiate proceeding at the COFC by filing a complaint within one year after the contractor receives the CO's final decision.  Failure to file the complaint within this twelve-month period will result in dismissal. 
The government agency has sixty days in which to file an answer to the contractor's COFC complaint. Thereafter, discovery may be conducted by both parties.
Unlike the BCAs, the COFC has more formal procedures.   A decision of the COFC is rendered by a single judge presiding over the case.  That judge's decision may be appealed to the Federal Circuit Court of Appeals.
Again, the subcontractor is not a party to the COCF hearing, but its involvement may be critical to the decision rendered by the COFC.

In conclusion, while government contractors have enumerated rights in contract disputes with government agencies, the subcontractor does not have a right to participate in any dispute negotiations and/or hearings.  If your company is a subcontractor on a government project, you should negotiate certain protections in your subcontract with the prime contractor.  Most important among your protections is a right to participate in any dispute with a government agency to help negotiate a settlement in all parties’ – and not merely the prime contractor’s – best interest.   Another part of the subcontract agreement where a subcontractor can protect itself is in the provision that requires the subcontractor to continue its performance in the event of a dispute.  The prime contractor requires this because continued performance under its contract with the federal government is a precondition to exercising its rights under the CDA dispute clause.   There are a variety of ways to ensure that you will receive the benefit of your continued performance.  In the end, scrutinizing the language of every clause in your subcontracts before signing them will help you avoid surprises later.