Introduction

This piece, the second of two parts, is an abstract of an article published in Volume 31 of the International Construction Law Review (Informa UK Ltd.) in January 2014. Part One  described briefly the bases of construction contract claims against the United States Government (hereinafter “U.S. Government”), while this Part focuses on the procedures for presenting those claims (and potential liability for false claims) from the perspective of a non-United States contractor performing a contract for an agency of the U.S. Government outside of the political jurisdiction of the United States, as well as considerations for subcontractors on such projects.  The subject matter seems to be of current interest as this firm has seen a considerable increase in such disputes arising from the U.S. Government’s embassy construction program, the large number of projects in Iraq and Afghanistan, and significant military construction in numerous locations.

Claims Procedures

Once a contractor has a claim against the U.S. Government, it must be submitted and presented in strict accordance with the Contracts Disputes Act of 1978. 41 U.S.C. §§ 7101-7109.  The various steps in the procedure are set forth below.

Initial Submission Of Claims

After having given initial notice of claim in accordance with the applicable provisions of the Contract, the next step is the actual submission of the claim.  Under the “Changes” clause, the submission must take place within 30 days of the date of receipt of a written change order or the date of the initial notice, whichever is applicable. 48 C.F.R. § 52.243-4. This 30-day time limit is not, however, strictly enforced, and the parties frequently agree to an extension.  Claims under other contract clauses or based on local law have no set time limit for submission of the claims, although it is best to submit them as soon as possible, and they must be submitted before final payment.  See, e.g., id. §§ 52.236-2(d) (requiring submission of differing site conditions claims prior to final payment), 52.242-14(c) (same, for claims under the Suspension of Work clause).

Certification Of Claims

Under the Act, the claim must be submitted in writing to the person designated in the contract as the Contracting Officer, and should specifically request a decision on the claim. 41 U.S.C. § 7103(a). If the claim is in excess of $100,000, it must be certified. Id. § 7103(b).  The FARs provide specific language to be used in the certification. 48 C.F.R. § 52.233-1(d)(2)(iii).

If a claim in excess of $100,000 is not certified, it is not a “claim” and cannot be considered by the Contracting Officer. Fidelity Constr. Co. v. United States, 700 F. 2d 1379, 1384 (Fed. Cir. 1983). Even if it is, in fact, considered by the Contracting Officer, the act is a nullity and the claim can be dismissed at any subsequent stage of the proceedings. See, e.g., OK’s Cascade Co. v. United States, 87 Fed. Cl. 739, 746 (2009) (“[A] Contracting Officer who renders a decision on an uncertified claim exceeds the scope of his authority and cannot bind the Government by his actions.”); United Constr. Co. v. United States, 7 Cl. Ct. 47 (1984).

A contractor that wishes to “pass through” claims against the U.S. Government that actually originate with a subcontractor also must comply with the certification requirements of the CDA and the FAR. See, e.g., Dillingham Constr., Inc. v. United States, 33 Fed. Cl. 495, 499 (1995). This requirement can lead to some tension between the requisite language and the actual information that may be available to the prime contractor when presented with the subcontractor’s claim.

Alternative Dispute Resolution

The CDA as currently constituted authorizes the U.S. Government to resolve claims via alternative dispute resolution. 41 U.S.C. § 7103(h). Methods of permissible alternative dispute resolution include arbitration, mediation, minitrials, and others. 5 U.S.C. § 571(3). If either the contractor or U.S. Government requests alternative dispute resolution, and the other party refuses, that party must provide their reason for refusal in writing. 41 U.S.C. § 7103(h)(3).

Final Decision Of The Contracting Officer

The Contracting Officer must issue its decision on claims of $100,000 or less within 60 days of receipt, if the contractor requests that the decision be issued within this period.  Id. § 7103(f)(1).  In general,certified claims in excess of $100,000 shall be decided within 60 days of receipt of the Contracting Officer or within a reasonable time; however, the contractor must be notified of the time within which a decision will be issued. Id. § 7103(f)(2),(3). The Final Decision must state the reasoning of the Contracting Officer in reaching his or her decision, and must also inform the contractor of its rights to appeal to a Board of Contract Appeals, or to bring suit in the U.S. Claims Court if the contractor disagrees with the decision. Id. § 7103(e).

If a Contracting Officer unduly delays issuance of a decision, the contractor may request the agency Board of Contract Appeals to direct the Contracting Officer to issue his decision. Id. § 7103(f)(4).  A failure by the Contracting Officer to comply with the time limits in which to issue a decision is considered to be a denial of the contractor’s claim (a “deemed denial”), thereby authorizing an appeal to a Board of Contract Appeals or commencement of suit in the Court of Federal Claims. Id. § 7103(f)(5).

Appeal Of The Final Decision Of The Contracting Officer

If the contractor disagrees with the Final Decision of the Contracting Officer, it has two appeal options.  The first is in the right to appeal to the Government agency Board of Contract Appeals within 90 days of receipt. Id. § 7104(a).  The second option is to file a suit in the United States Claims Court within 12 months of receipt. Id. § 7104(b)(3).   The jurisdiction of both fora is based on timely appeals. Id. § 7105(e).  Thus, a failure to appeal the Final Decision in a timely manner renders the Contracting Officer’s decision final and conclusive on both parties. Once appealed, however, the contractor is entitled to a de novo proceeding; the findings of the Contracting Officer are not binding in any subsequent proceeding. Id.§§ 7104(b)(4); 7105(e)(2).

Boards Of Contract Appeals

The two primary Boards of Contract Appeals are the Armed Services Board of Contract Appeals (ASBCA) and the Civilian Board of Contract Appeals (CBCA).  For foreign contractors, the ASBCA will present the most common forum, as it has jurisdiction over all contracts entered into by branches of the Defense Department and their various engineering arms. Id. § 7105(e)(1). The Civilian BCA may also present an appellate destination in the case of U.S. Department of State contracts abroad, such as embassy construction. Id. § 7105(e)(2).

Upon notice of the docketing of an appeal, the contractor must file a Complaint within 30 days. SeeA.S.B.C.A. R. 6(a).  The Government must respond with an Answer within 30 days, Id. R. 6(b), and state the reasons why it believes the contractor’s claim is not valid.  The Government, through the Contracting Officer, is also required to prepare and forward an appeal file containing all pertinent contract documents relating to the appeal. Id. R. 4. The Contractor may supplement the record with any additional documents it considers to be necessary to its appeal.  Id.  In pursuing the appeal, the contractor may be represented by counsel, but can also handle its own case. The Government typically will be represented by attorneys from the affected agency.

Hearings before the Boards are adversary proceedings which resemble hearings before arbitrators.  A relaxed version of the Federal Rules of Evidence are in force and are flexibly applied. Id. R. 20(a).  Briefs will be accepted in all but accelerated procedures cases before the Board, and should summarize both the facts and applicable law.

The final decision of a Board is reached by a majority vote of the presiding members.  A decision of a Board of Contract Appeals shall be final and conclusive upon the parties unless an appeal is taken to the United States Court of Appeals for the Federal Circuit within 120 days of receipt of the decision. 41 U.S.C. § 7107(a).

The United States Court Of Federal Claims

The alternative forum is a lawsuit in the United States Court of Federal Claims. Such claims must be brought within 12 months of the Final Decision of the Contracting Officer. Id. § 7104(b). The process is commenced by the filing of a Complaint and service of process on the Government. Ct. Fed. Cl. R. 3-4.  The subsequent procedures more closely track the Federal Rules of Civil Procedure applicable in United States District Courts. See generally Rules of the United States Court of Federal Claims, Title 28 U.S.C.

Though the Court of Federal Claims is located in Washington, D.C., it is authorized to hold hearings elsewhere throughout the United States, usually in other federal court facilities. 28 U.S.C. § 798(a). In certain circumstances, the Court may hold hearings abroad if “the interests of economy, efficiency, and justice will be served.” Id. § 798(b).

The actual trial is formal and cannot be conducted without a U.S. counsel. Ct. Fed. Cl. R. 83.1(a)(3).  Trial counsel from the U.S. Department of Justice typically will represent the Government, in contrast with Board of Contract Appeals proceedings, in which agency counsel usually plays that role.  As compared with the slightly more relaxed standards for receipt of evidence before the Boards, the Federal Rules of Evidence govern the introduction of evidence and are strictly enforced. Fed. R. Evid. 101; see also Fed. R. Evid. 1101.  There is no right to a jury trial. See Ct. Fed. Cl. R. 38.

If either party is dissatisfied with the decision of the Court of Federal Claims, an appeal can be made to the U.S. Court of Appeals for the Federal Circuit. 28 U.S.C. § 1295(a)(3). The disappointed party must file its notice of appeal within 30 days after the entry of judgment or the order being contested. Ct. Fed. Cl. R. 58.1, Fed. R. App. P. 3-4.

A foreign contractor may be prevented from bringing suit in the United States Court of Federal Claims or the United States Court of Appeals for the Federal Circuit absent a showing that their government “accords to citizens of the United States the right to prosecute claims against [it] in its Courts”. 28 U.S.C. § 2502(a).  Thus, a foreign plaintiff suing the United States in these Courts must establish that “a right is accorded citizens of the United States to prosecute claims against the alien government in the Court of that nation.” Nippon Hodo Co. v. United States, 152 Ct. Cl. 190, 192; 285 F.2d 766, 767 (1961).  The Court of Claims has dismissed at least one claim by a foreign company which presented no evidence to “show the reciprocal right to sue in the Court of his country.” Aktiebolaget Imo-Industri v. United States, 101 Ct. Cl. 483, 54 F. Supp. 844 (1944). On at least one occasion, the Court of Federal Claims rejected second-hand testimony offered by the U.S. Government that political instability rendered the “reciprocity” in the foreign jurisdiction illusory. El-Shifa Pharm. Indus. Co. v. United States, 55 Fed. Cl. 751, 757 (2003) (“The right of a citizen of the United States to prosecute claims in Sudan, even assuming they are impaired by strained diplomatic relations between the two nations, still exists as a legal matter.”), aff’d, 378 F.3d 1346 (Fed. Cir. 2004).

Liability For False Claims

False Claims Act

The False Claims Act (FCA), 31 U.S.C. §§ 3729-3733, imposes civil liability on any party who, among other actions, “knowingly presents or causes to be presented a false or fraudulent claim for payment or approval,” or “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.” Id. § 3729(a)(1)(A)-(B).  The FCA provides that any party making a false claim is liable to the Government for a civil penalty of between $5,000 and $10,000 for each false claim, and, in addition, three times the amount of damages which the United States may have sustained by reason of the doing or committing of such act (e.g., by making payment on a false claim). Id. § 3729(a).

Contract Disputes Act

Construction contractors working under federal contracts also are subject to substantial liability for submitting fraudulent claims under the Contract Disputes Act. 41 U.S.C. § 7103(c).  Under the CDA, the Government is entitled to recover from the contractor an amount equal to that part of the contractor’s claim attributable to fraud or misrepresentation.  Section 5 of the Act provides as follows:

If a contractor is unable to support any part of the contractor’s claim and it is determined that the inability is attributable to a misrepresentation of fact or fraud by the contractor, then the contractor is liable to the Federal Government for an amount equal to the unsupported part of the claim plus all of the Federal Government’s costs attributable to reviewing the unsupported part of the claim. Liability under this paragraph shall be determined within 6 years of the commission of the misrepresentation of fact or fraud.

Id. § 7103(c)(2).

Importantly, the remedies under the CDA provision exist in addition to other statutory remedies the Government may have to combat fraud.  This can result in substantial liability for a contractor, even where its liability under other statutes, such as the False Claims Act, may be more limited.

Forfeiture Of Fraudulent Claims Act

In addition to the possible penalties under the FCA and CDA, a third, wholly independent statute can result in the loss of even valid claims if the contractor has committed fraud. The Forfeiture of Fraudulent Claims Act provides:

A claim against the United States shall be forfeited to the United States by any person who corruptly practices or attempts to practice any fraud against the United States in the proof, statement, establishment, or allowance thereof.

In such cases the United States Court of Federal Claims shall specifically find such fraud or attempt and render judgment of forfeiture.

28 U.S.C. § 2514.

Suspension And Debarment

In addition to the sanctions already discussed, suspicion by the Contracting Officer of contractor fraud in connection with the submission of a claim may lead to the initiation of suspension or debarment proceedings.  Suspension is solely an administrative action resulting in a temporary disqualification from Government contracting because a concern or individual is suspected, upon adequate evidence, of engaging in criminal, fraudulent, or seriously improper conduct. 48 C.F.R. §§ 9.407-2 through 9.407-4.

D. Wonderlick and P. Varela were contributors to this article.